The Littles welcome their second son, a boy who is two inches tall and looks like a mouse. He does not act like a baby, walking immediately and dressing like a gentleman.
Though shocked, Stuart's family members gradually adapt to the conditions of having such a small child, often having to change some of the physical aspects of their home to facilitate Stuart's living there. One day Stuart is arguing and competing with the family cat, Snowbell, and accidentally gets himself stuck in one of the house's window-blinds. Taking advantage of Stuart's entrapment, Snowbell, who is not fond of Stuart, steals the mouse’s hat and cane and places them right outside of a mouse hole, which panics Stuart’s family. Stuart's human brother George eventually, and accidentally, sets Stuart free, and the family is relieved.
Stuart is adventurous and loves sailing, and partakes in a dramatic sailboat race at the sailboat pond in Central Park. This earns him a post on the sailboat of his dreams, the Wasp, owned by a friendly dentist who is pleased to see a skilled boatman in Stuart.
Stuart befriends a pretty bird named Margalo, and she stays for a time with the Little family. After taking her in, Stuart bravely protects Margalo from Snowbell, and Margalo repays Stuart for this when she helps Stuart escape from a garbage heap that is being shipped off to sea.
At some point after rescuing Stuart, Margalo is warned that one of Snowbell's friends is going to eat her. Because of this, she flees the Little house. Missing her intensely, Stuart sets out to find her. The dentist lends Stuart a gasoline powered model car, which is modernized to have an invisibility button. Stuart accidentally pushes it, and the laborious search for the invisible, miniature vehicle delays his departure.
Finally Stuart is able to leave New York City to find Margalo. During his travels, Stuart works as a substitute teacher for one day and stays for a brief time in a charming town called Ames Crossing. There he tries to woo a girl just a bit shorter than him named Harriet Ames (her family is a pillar of the community, and she is seen as one of its most fashionable residents), but his perfect canoe date goes awry, and he knows he must leave the town and continue the search for Margalo.
As the book concludes, Stuart has not yet found his friend, but is heading north and is exceedingly sure that he will.
