Fuzzy Mud opens with Tamaya Dhilwaddi, the novel's protagonist, having lunch with her fifth-grade friends. They attend a rural Pennsylvania private school called Woodridge Academy. Tamaya walks to school every day with Marshall Walsh, a seventh-grader who lives on the same block. Tamaya is an obedient student with a perfect attendance record. She doesn't understand other students' attraction to breaking the rules. Her friend Hope teases her for being a Goody Two-Shoes after Tamaya reminds an older boy, Chad, that they aren't allowed to go into the woods next to the school. Marshall, meanwhile, sits silent and alone.
The narrative cuts away to excerpts from a U.S. Senate hearing about the activity of SunRay Farm, a company started by the eccentric inventor Jonathan Fitzman. An ex-employee testifies about the dangers of Biolene, an alternative fuel source being developed by the company. He calls the genetically altered slime mold an abomination of nature.
Back at Woodridge, Marshall tells Tamaya they are taking a shortcut home through the woods. Breaking the rules concerns Tamaya, but she follows Marshall under a fence. She is unaware that he is trying to avoid running into Chad, who earlier that day challenged Marshall to a fight. Marshall isn't sure why Chad has been tormenting him since he joined the school. All he knows is that he wants to avoid getting beaten up.
Marshall's shortcut ends up getting him and Tamaya lost. Tamaya believes they are saved when Chad suddenly appears in the woods, but Chad shouts at Marshall for making a fool of him and attacks him. Tamaya, quick to react, grabs a nearby handful of the dark, fuzz-covered mud puddled in front of her and throws it in Chad's face. This provides the students an opportunity to run home, leaving Chad in the woods.
That evening and into the next day, an aggressive rash develops on Tamaya's hand, traveling up her arm. Meanwhile, the headmistress tells Marshall's class that Chad has gone missing; she requests any useful information, but Marshall keeps quiet. At lunch, Tamaya goes to Marshall and says he must be in the forest. She reasons that what's happening to her hand must be happening to his face. Marshall refuses to go find him, so Tamaya sets out into the woods on her own. She finds that Chad's face is badly swollen and he cannot see. He is angry with her at first, but he accepts the food she has brought him and is thankful that she is helping him leave the woods.
While the school goes into lockdown because two students have gone missing in two days, Marshall makes his way into the forest to rescue Tamaya. When he finds the two students in the woods, he is surprised to discover that they have become friends, and assists them out of the woods. Chad confesses that he is mean to other kids because his parents ignore him or, when they do pay attention, are cruel to him. He says he resented Marshall because while Marshall's mother made him his favorite food for his birthday, Chad's parents did nothing. Fortunately, the weary and rash-covered students are rescued by a search team and taken to the hospital for treatment.
The final chapters of the novel involve further Senate testimony; however, this new hearing is about the Heath Cliff Disaster, as it is being called. The reader learns that the 'fuzzy mud' Tamaya discovered is a mutated version of Biolene, the self-replicating fuel that was supposed to disintegrate when exposed to oxygen. Fitzman testifies in defense of his creation, claiming he never meant to start a pandemic.
Further chapters detail Tamaya's recovery in the hospital. The rash caused by the mutated Biolene is so bad that she has lost her eyesight. Meanwhile, the whole town has gone under quarantine to contain the spread of the rash disease. Luckily, the rash, which gets named after Tamaya, is soon cured by a turtle-enzyme vaccine developed by Dr. Crumbly, a Heath Cliff veterinarian. In more good news, the CDC ends the quarantine on Heath Cliff after winter freezing temperatures kill the organisms in the fuzzy mud.
The novel ends with Tamaya receiving the turtle vaccine, recovering from her rash, and regaining her eyesight. She testifies before the Senate about her experience. She learns that her decision to follow Marshall into the woods resulted in countless lives being saved, because if she hadn't discovered the mud when she had, it would have spread beyond Heath Cliff quickly. In the book's last scene, Tamaya and Marshall climb a tree in the woods with Chad, looking out over the beautiful frozen landscape.
