Don Alonso Quijano is obsessed with novels. Knights, fights, giants and enchanted princesses fascinate him so much that he can bring his sword over the head of his old housekeeper imagining she is a giant. This tall and thin man of about fifty years is fully immersed in the world of legends and chivalry. He claims that true knights don’t live for themselves, they save the world, helping widows and orphans, protecting the weak and defenseless. He is disgusted with modern society when everyone lives not caring about the welfare of others.
The income from his estate is barely enough for the most modest food and clothing. Don Quijano spends all the spare money on novels, believing them to be the true stories. Once he decides to become a knight errant and travel in search of adventures. In his closet, he finds old armor and weapons of his ancestors. It is complete except of helmet, so he has to make the helmet by himself. He takes the new name - Don Quijote de La Mancha. The knight-to-be also finds a horse, as old and skinny as his new owner, named Rosinante. There is only one thing left unresolved: the absence of the fair lady to slay giants in her name.
In the neighboring village of Tobosco an aged knight sees a young peasant girl named Aldonsa. He gives her a new, magnificent name - Dulcinea of Tobos and swears to defend her honor, and dedicate all his deeds to her.
In the early July morning, Don Quijote saddles Rosinante, puts on armor, takes a spear and starts his journey. But suddenly he realizes that no one knighted him. According to the novels every owner of a castle has the right to knight those who deserves it. Don Quijote lets Rosinante go wherever he wants, trusting in fate. The poor knight rides all day and at the evening his fatigued horse begins to stumble.
A poor inn appears in the distance. Don Quijote treats two gossiping girls at its gate as the fairest of ladies, making them laugh. The owner of the tavern wonders if the traveler has money and the knight is surprised - no novel told him about money. The innkeeper convinces him that every knight needs to have money, other supplies and, most importantly, a clever squire. Unwilling to provide a room without payment, the innkeeper sends the guest to guard his armor in the yard. Don Quijote responsibly wanders around the armor like a night ghost. The mule owners who needed to care for their animals were defeated by his spear. They were ready to beat the mad old man to death, but the innkeeper saves him and knights him with two strong hits on the shoulders.
Don Quijote thinks heavily about choice of the squire. He chooses one of his simple-minded peasants and turns Rosinante back. Suddenly he hears screams and sounds of blows from the nearest forest. A peasant tied a shepherd boy to the tree and lashed him with his belt for not guarding the sheep properly. Don Quijote beats the peasant making him promise that the boy won’t be beaten anymore and will receive his salary. No surprise that the peasant lashes the young shepherd twice as angry as soon as the knight leaves.
On his way, he meets the merchants making fun of him, but his imagination presents them as a group of rival knights he is obliged to fight. The knight rushes into battle but falls off his horse unable to stand up under the weight of his heavy armors. But the kind peasant later helps him stand up and ride a donkey. The remains of his spear and all the armor are put onto Rosinante and that way Don Quijote is taken home.
His housekeeper and priest believe that it is all because of stupid books. They decide to burn all of them and tell the old man that the scarlet sorcerer took away all his library. They do really burn all the books on the backyard and, as expected, Don Quijote believes every word about a sorcerer riding a huge dragon. But it doesn’t stop him.
The poor peasant Sancho Panza lives nearby. He isn’t very smart but he wants to become rich, so, when Don Quijote offers him a salary and, perhaps, a distant island to rule later, he agrees. The old knight sells part of his estate, fills his purse with coins, fixes the spear and orders his new squire to prepare to the journey.
In search of adventures, they travel near the valley with lots of windmills there. Don Quijote assures Sancho that these windmills are actually giants and rushes into battle. The wind rises and turns the winds of the mills faster and faster. The knight drives his spear into the wing and is lifted up, turned around and dropped to the ground. Sancho helps him stand up and put a tip of a spear on a random stick, “fixing” it. The knight is sure that the sorcerer who robbed his library turned giants into mills.
Travelling further they meet two monks guarding a carriage in which a lady is travelling. The knight decides that the lady is the beautiful princess and monks are holding her hostage. Disregarding their pleas, he beats both of the monks (whom Sancho promptly robs considering their possessions a trophy). The frightened lady falls to her knees, begging not to hurt her servants anymore and Don Quijote grants them his mercy.
Don Quijote suffered some more painful defeats, such as being beaten by shepherds, whose horses attacks Rosinante. A good-natured owner of the inn nearby treats his wounds and gives him shelter, but at night the old man groans so loud that he wakes up the mules sleeping nearby and they beat him again. Don Quijote tries to prepare his magical balm curing all the illnesses but fails and both he and Sancho vomit from it. He sets free the condemned prisoners, but, instead of gratitude, they just mock him, throw stones to him and Sancho and rob them both. The old man fights sheep, water mills and other items, people and animals, taking the title invented by Sancho - the Knight of the Sorrowful Face.
Meanwhile, at his home, people start to worry about Alonso Quijano. His nephew and the housekeeper look for him everywhere, the barber and the priest help them. Finally Sancho, riding Rosinante, comes to the gates and tells the story of the madman knight who sent him to tell Dulcinea about his deeds. Anxious, they together try to invent the way to return Alonso home. The priest asks one travelling lady to pretend she is a foreign princess of Mikomikon kingdom and she is in distress, the barber in disguise pretends to be her faithful page. Don Quijote believes the “princess” instantly and agrees to escort her to the nearest inn.
At night a “terrible giant” attacks the knight. Frightened innkeeper comes to the noise and sees that his guest beats wineskins which were stored there and wine floods the whole room. In the morning Don Quijote assures everyone that he chopped off the giant’s head and demands it to be sent to Dulcinea of Tobos. The barber and the pastor lure him into the wooden cage placed on a cart and took him home that way.
But they face another trouble after returning home. Don Quijote bursts into tears, refusing to eat and is weak as a sick child lying in bed all the time. He starts recovering after a while but he still looks like a shadow of his former self.
Sancho Panza pleases his family with a purse full of gold found by his master and presented to him for faithful service. He tells everybody about fantastic adventures he experienced.
But then a bachelor named Samson Carrasco appears in the village. He claims that he can cure the old man but if only he continues to travel as Don Quijote. Carrasco tells the old man that he read a book describing the great deeds of the Knight of the Sorrowful Face. The naїve dreamer, not seeing that he is maliciously mocked, agrees to serve an example to the noble young man and go for a new adventure. Calling for his faithful squire Don Quijote prepares for the travel. Carrasco secretly follows them.
The bachelor makes himself a luxurious outfit embroidered with mirrors and takes a squire himself (it was Sancho’s neighbor). As the Knight of the Mirrors he stands on the way of Don Quijote claiming that he defeated many knights in the name of his lady and the Knight of the Sorrowful Face will soon be added to that list. The duel starts.
Carrasco planned to win the duel and take an oath for not going to the adventures for at least two years, but Don Quijote unexpectedly easy defeats Carrasco. He thinks that miraculous transformation of the knight to familiar bachelor is the evil spell of a wizard and he sends “the Knight of the Mirrors” to his beloved Dulcinea.
On the way, Don Quixote meets a man in a beautiful green attire, on a beautiful horse. This is the owner of the neighboring estate - rich Don Diego. He becomes interested in old man’s ideas and invites him and his squire to his house.
Suddenly the knight notices dust on the road and sees a caravan transporting cages with lions to the King. Don Quijote demands to release the lions immediately because he wants to fight them. The lion keepers try to convince him, but the knight is unshakable. Finally, one of them opens the cage, but the lion is scared of ridiculously-looking and noisy human and refuses to go out. Don Quijote is extremely proud of his courage and adds a new title to his name - the Knight of the Lions.
Don Diego accommodates the old man and his squire in his mansion. They live in luxury but serve as unwilling jesters to Diego and his guests, because Carrasco plays different pranks with them for his - and Diego’s - amusement. Once he claims that Dulcinea was captured by evil Merlin and only three hundred lashes given to Sancho by himself can rescue her. Once Sancho and Don Quijote nearly drown courtesy of the Duke telling them to sail the river to the water mill. Then Don Diego proclaims Don Quijote to become a Duke and Sancho Panza a governor of the distant island and sends the peasant to one of his cities. But suddenly no more amusement follows: Sancho rules incredibly well and wise, even if not doing something actually important.
After a while both - Don Quijote and Sancho - grow tired of their “titles” and “responsibilities” and again return to their adventures taking from the generous Diego nothing except the essentials. They go to Barcelona, where they meet another rich man, don Antonio, who also wants to have fun (courtesy of Carrasco who got there first). They are surrounded with magnificent riders on the “tournament” and invited to the ball after it. But after all the laughter is over, Carrasco, dressed as the Knight of the Moon finally defeated Don Quijote in the duel and demanded him to return home for a year, but, not to upset the old man too much, accepts that Dulcinea’s beauty is incomparable to any woman’s born on earth.
During their way home Sancho tries to comfort his master saying that a good piece of meat can be better than any adventure. He even agrees to give three hundred lashes to himself to free Dulcinea (although he lashed himself only five times, only screaming after it to convince Don Quijote he is in pain).
Don Quijote returns home. He is broken and depressed, soon he falls ill with a fever caused by exhaustion. And, most importantly, he finally sees how pathetic and ridiculous he was with all his dreams, old armor and chivalry.
Three days before his death he admits that everything what he did was aimless and he was pursuing phantoms. Finally, the old man dies as poor Spanish Idaho Quijano. Sancho cries near the bed of his master begging him to live and forget about his failures, he blames himself for them just to encourage the old man to live. But it is futile.
Before the very death the former knight writes his last will, transferring all his estate to his niece but only in case she won’t marry a knight errant.
He dies and Samson Carrasco composes an epitaph for his grave starting with: “The body of a knight lies here, / So brave, that to his latest breath/ Immortal glory was his care,/ And makes him triumph over death.”