Set hundreds of years before the Deptford Mice Trilogy in the Middle Ages, the story tells the tale of the squirrel maiden Ysabelle, daughter of the ruler of the Hazel Realm, Lady Ninnia, and Vespertilio (or Vesper), a young bat.
The story begins in a ruined tower in London where the Bats live, and they are readying themselves to go to war to fight the squirrels. They believe that the Starwife, ruler of the black squirrels, has stolen their birthright of insight and seeing into the future. In the midst of the preparations, Vesper longs to experience the battle for himself, but he is too young to go.
Meanwhile, in the Hallowed Oak in Greenreach, the Starwife has been seriously ill. Unbeknownst to her, her trusted handmaiden Morwenna has been poisoning her.
As the bat army launches an attack that will destroy her realm, the poison begins taking full effect on the Starwife and Morwenna reveals her treachery. But before she perishes, the Starwife summons a peregrine falcon who carries her symbol of office, a silver acorn necklace, away to safety.
The next day, far away in the Hazel Realm, the celebration for the holiday of Aldertide has begun. Ysabelle is eager to join the festivities, much to the dismay of her field mouse nursemaid Griselda.
Soon however, a group of bats who are pursuing the falcon bring an end to the day's happiness. The bats manage to kill the falcon and, to Ysabelle's horror, its body falls near her and the silver acorn drops into her palm.
The bats swoop down and attack the squirrel maiden. She is saved by the stoat jester Wendel Maculatum, and most of the bats are soon defeated. One is taken as a prisoner. He verifies that the land of Greenreach has fallen, and says that others of his kind will soon return that night and destroy the Hazel Realm. But before they can get any more information out of him, the bat kills himself by running into one of the squirrels' blades.
Left with no other choice, the Lady Ninnia must send her daughter to Greenreach, accompanied by the squirrel guards of the realm. Since she caught the silver acorn, she has automatically received the title of the Starwife. Ninnia and her husband Cyllinus know that they and many of the squirrels must stay in the Hazel Realm to face certain death. They say their painful goodbyes, knowing that they will never see Ysabelle again.
As the squirrels march deeper into the forest, they encounter a bat, whom they soon discover is no more than a child. It is Vesper, who has secretly left his home to try to participate in the battle. The squirrels force him to march with them.
Later that night, the group is attacked and Ysabelle, Vesper, and many of the squirrel guards are taken prisoner by Hobbers, a group of creatures who worship three evil rat gods called the Raith Sidhe, in particular the worst one, Hobb.
It is soon realised that Ysabelle's silver acorn is gone from around her neck; it has been stolen by the high priest of Hobb. The squirrels and bat are led out to an area in the forest wherein a large amount of Hobbers are gathered. The high priest, dressed in a red silk costume, appears and calls for a squirrel to be taken to him. A wicked hedgehog named Pigwiggen unties the unfortunate squirrel, who is then led to the high priest. He is skinned alive in a sacrifice to Hobb. The high priest then lifts up the silver acorn and dips it in the squirrel's blood. Two more squirrels suffer this same fate before a group of Ysabelle's guards decide to recover the silver acorn while the Hobbers are distracted by the sacrificing.
This goes as planned but unfortunately these squirrels die in the effort. Ysabelle and Vesper escape into the night, but along the way are confronted by the high priest, who curses them both. Vesper, he says, will die surrounded by the sound of bells. By dipping Ysabelle's silver acorn in blood, he is summoning Hobb to the world, and when the evil rat god arrives he will destroy Ysabelle. After saying this, the high priest disappears into the forest.
Vesper is disheartened by his grim prophecy, but Ysabelle doesn't care and wants to continue her journey to Greenreach with him as her guide. He grudgingly agrees to help her, despite the fact that he doesn't really know the way himself.
Later, to Vesper's horror, he hears the sound of bells approaching. He fears that this will be his doom, but it turns out that this sound is coming from bells on the lead of a shrew who from this is attached to a mole. The two introduce themselves as Tysle Symkin and Giraldus. Ysabelle and Vesper soon learn that Giraldus is leprous and nearly blind, and that Tysle is lame. The two are very friendly and invite the bat and squirrel to eat with them.
Giraldus and Tysle say that they are on a pilgrimage to Greenreach, hoping that they will be cured when they arrive. Ysabelle realises that the two could accompany her on her journey since they are bound for the same place. Vesper is a bit hesitant at first, and Giraldus understands, knowing that it is probably because of his disease. Ysabelle doesn't care however, and insists that they come with her.
The four of them travel to the Orchard of Duir, a place where in legend, the Green spirit (whom many of the woodland animals worship) planted seven trees before winter came. When they get there, however, Ysabelle, Vesper and Tysle see that the orchard is not the beautiful place it once was. Not wanting to disappoint Giraldus, they tell the blind mole that it still looks the same, though Ysabelle does not feel right lying to him.
After the group goes to sleep in the limbs of one of the trees in the orchard, Ysabelle is awakened by a voice speaking to her. She looks up and sees two large green eyes staring at her. They are those of the Green. He informs her that the bats are not the true enemy of the squirrels, but have been misguided. He also tells her that one of her friends will betray her. Ysabelle, shocked, asks the Green which one of them it will be, but he disappears before giving her an answer.
The four again meet up with Wendel Maculatum, who is astonished to see that Ysabelle is alive. He tells them that he was separated from the remaining Hazel Realm guards and has been travelling through the forest for many days. He says that in that time he has heard of a group of woodlanders who are resisting the Hobb cult. He doesn't know exactly where they are, however, but they are somewhere near a lake.
Upon following a stream, Ysabelle, Vesper, Giraldus, Tysle and Wendel reach a lake, but its water is dark and polluted, and there are no signs of the woodlanders anywhere. Nevertheless, they decide to camp there. Much to Giraldus's dismay, Tysle is beginning to prefer the company of Wendel, watching eagerly as the stoat jester carves puppets out of wood.
Later in the night, the ghosts of animals who had drowned in the lake rise up and try to drag the travellers down with them. The group manages to escape, and soon they find their way to a meadow filled with daffodils. It is here that they are captured by the very woodlanders they were searching for. These woodlanders are led by a mouse captain named Fenlyn Purfote. At first he acts friendly toward the five travellers, taking them to the woodlanders' headquarters, but his mood changes when he suddenly locks them up because he thinks they are Hobbers. Although they try to tell him that they most certainly are not, Fenlyn (or Fenny, as he is often called) will hear none of it.
However, Fenny soon receives a message from a mysterious figure called The Ancient, who wishes to speak with Ysabelle and Vesper. Finally convinced that they are not Hobbers, Fenny leads them both down a dark passageway deep underground, where they come upon The Ancient—who is the messenger of the moon goddess, who came to earth in the form of a hare. He tells the bat and squirrel that the only way to prevent doom befalling the world is to convince their kinds to join together to battle the Hobbers. To Vesper's shock, The Ancient reveals that it was not the Starwife who took away the bats' power to see into the future, but their very own Warden of the Great Book, Hrethel.
He also tells Ysabelle that because the high priest dipped the silver acorn into the blood of the squirrels that were sacrificed, Hobb has been summoned back into the world, and that even now he is rising from the Pit. In three days time he will appear to claim Ysabelle. What the squirrel maiden doesn't know, however, is that this very night is the third day.
Vesper is given a bag of special herbs to be thrown into a fire, which will summon all of the bats. He believes that there is no way that he could ever convince them that the squirrels are not their enemy. After Ysabelle and Vesper return, their three friends are also released from their cell.
Later that night, the woodlanders hold a celebration for their five guests to make up for the way they previously had treated them. Ysabelle and Vesper dance together, and begin to realise that they are falling in love. While Wendel is away from his jester's cart, Tysle takes the opportunity to look through his prop chests. He pulls out many amusing objects, but suddenly he sees a silken costume of some sort, which appears to imitate what a victim of a peeling would look like. A horrifying realisation hits Tysle; this is what the high priest of Hobb wears, and that is Wendel's true identity!
Before he can run to tell Giraldus what he has discovered, Wendel appears and taunts the little shrew. Then he pulls out a peeling knife and kills him. Tysle's body is found soon after, much to everyone's shock. His being peeled is confirmation that a member of the Hobb cult is among their number. Before this fact can completely sink in, a guard rushes to tell Fenny that the Hobbers are on the move, heading toward their stronghold.
Ysabelle and Vesper escape through a tunnel, though not before Wendel reveals his treachery. Mad with grief for his friend, Giraldus starts choking the stoat, but Wendel manages to free himself and strangle him. But before he dies, the mole starts a cave-in and Ysabelle and Vesper can only watch as the entire tunnel collapses on Giraldus, Wendel, and the Hobbers.
The bat and squirrel finally arrive at Greenreach, but Vesper is wounded by Hobber crows who have pursued them. Morwenna approaches Ysabelle, and tells her that she wants to help her bring the silver acorn to the Starglass. The unknowing squirrel maiden follows her down below the Hallowed Oak, into a dark chamber. As the two talk, Ysabelle begins to piece everything together and figures out that Morwenna is the one who betrayed the Greenreach squirrels. Morwenna confirms this and reveals that she is the priestess of Mabb, the rat goddess consort of Hobb. She takes the acorn from Ysabelle and locks her in the chamber where her pet toads wait to devour the squirrel maiden.
The remaining army of the Hazel Realm arrives in Greenreach and the battle begins. Feeling better, Vesper awakens and hears Ysabelle crying out and goes to rescue her. The two of them rush out of the oak and see the bats and squirrels fighting. Vesper decides that this is his chance to use the herbs that The Ancient gave him, and tosses them into a fire, sending up a beacon which distracts all of the bats, as well as the squirrels. They gather around and listen to his story. Most of them begin to believe what he is telling them; it seems to explain quite a bit.
At that moment, the Hobbers arrive, surging up the hill towards them. Now the bats and squirrels are allied together, fighting their true enemy. Ysabelle races up the Hallowed Oak to face Morwenna, who still has the silver acorn. But as she approaches her, the amulet around Morwenna's neck becomes extremely hot, burning her fur. It is then that Ysabelle realises that Hobb has begun to break through the ground. Ysabelle stares in horror while Morwenna is jubilant—that is, until she sees the claws of the rat god reaching for her. The high priest merely cursed the wearer of the silver acorn, not Ysabelle in particular. Hobb blows fire onto Morwenna and she is killed.
Vesper swoops down and grabs Ysabelle, just as Hobb kicks the Hallowed Oak and it topples to the ground. Ysabelle tells Vesper to take her down to the ground, where she snatches the silver acorn which had fallen. Then she hurries to the Starglass, now lying on the grass, and holds the pendant over it. A white light wells up and travels through her body; the powers channel through her, and this means that she is now truly the Starwife.
Now she is faced with the task of defeating Hobb. She calls out to the rat god and he turns his attention to her. She says that since the acorn drew him back into the world, he will now have that which lured him. Using the forces within the amulet, she imprisons Hobb within an acorn, then faints, exhausted.
Several weeks later, the wreckage of the Hallowed Oak had been removed, and the hill was cleaned up. On the day of Ysabelle's inauguration as the Starwife, Vesper arrives and asks to speak with her. When she approaches, he proclaims his love for her and asks her to relinquish her office and to run away with him. She refuses, believing her duty to be more important, and leaves him alone.
Saddened, Vesper watches her leave, not knowing what to do. A cloaked figure approaches him and offers him a drink of a strange mixture. Vesper politely accepts, and as he sips it, the figure reveals himself to be the ghost of Wendel Maculatum. The drink was poison, and Vesper's curse was finally fulfilled.
At the same time, Ysabelle is feeling guilty for the way she treated Vesper, and realises that she does love him. She runs outside, eager to tell Vesper this, but is heartbroken to find him lying dead, surrounded by bluebells.