A peasant girl named Karen is adopted while still very young, by a rich old lady after her mother's death and, as such, grows up vain and spoiled. Before her adoption, Karen had a roughly-made pair of red shoes; after, she has her adoptive mother buy her a pair of red shoes fit for a princess. Karen is so enamoured of her new shoes that she wears them to church, but the old lady tells her, "This is highly improper: you must only wear black shoes in church". But the following Sunday, Karen is unable to resist putting the red shoes on again. As she is about to enter the church, she meets a mysterious old soldier with a red beard. "Oh, what beautiful shoes for dancing," the soldier says. "Never come off when you dance," he tells the shoes, and he taps each of the shoes with his hand. After church, Karen cannot resist taking a few dance steps, and off she goes, as though the shoes controlled her, but she finally manages to stop them after a few minutes.
After her adoptive mother becomes ill and passes away, Karen doesn't attend her funeral, choosing to go to a dance instead. Once again her shoes take control and this time she is unable to stop dancing. An angel appears to her, bearing a sword, and condemns her to dance even after she dies, as a warning to vain children everywhere. Karen begs for mercy but the red shoes take her away before she hears the angel's reply.
Karen finds an executioner and asks him to chop off her feet. He does so but the shoes continue to dance, even with Karen's amputated feet inside them. The executioner gives her a pair of wooden feet and crutches. Thinking that she has suffered enough for the red shoes, Karen decides to go to church so people can see her. Yet her amputated feet, still in the red shoes, dance before her, barring the way. The following Sunday she tries again, thinking she is at least as good as the others in church, but again the dancing red shoes bar the way.
When Sunday comes again Karen dares not go to church. Instead she sits alone at home and prays to God for help. The angel reappears, now bearing a spray of roses, and gives Karen the mercy she asked for: her heart becomes so filled with peace and joy that it bursts. Her soul flies on to Heaven, where no one mentions the red shoes.