“The Rocking-Horse Winner” opens with an introduction of the character of the “beautiful woman” who will thereafter be known as “the mother.” She is described as having “no luck,” despite having a great start in life. Her marriage and family have not been satisfying. She knows she does not feel any real love for her children, even though outsiders assume she does love them; the children—two girls and a boy—sense her apathy as well.

The defining feature of the family is the gap between their lifestyle and their actual financial situation. Everyone in the family is aware that there is “never enough money.” When the mother explains to her son, Paul, that they are the poorest relations in their extended family, she simply tells him that his “father has no luck.” They have a conversation about the relationship between luck and money, and the mother claims that luck “causes you to have money” and that it is better to be born with luck than with money because money can be lost. She tells Paul that his father is “Very unlucky,” and Paul questions his mother’s theories. He confidently declares that he is lucky because God told him, but he knows his mother does not believe his statement.

In order to try to convince his mother that he is lucky, Paul tries to discover “the secret to ‘luck.’ ” He spends his time “madly” riding his rocking horse, thinking about how he can obtain luck. One day, Uncle Oscar comes to visit and sees Paul riding the rocking horse; he inquires jokingly whether Paul is “riding a winner.” The conversation between Paul and Uncle Oscar continues until Oscar learns that Paul calls his rocking horse by the name of a recently successful horse in the real races, like the one at Ascot. Paul’s sister Joan says that Paul talks to Basset, their gardener, who is apparently a horse racing enthusiast. Oscar questions Basset, who seems to have a reverence for Paul’s uncanny ability to predict obscure winners for big horse races. Oscar asks his nephew if he ever bets money on horses and is shocked to learn that Paul has earned a few hundred pounds on his bets. Paul predicts that Daffodil, an underdog, will win the Lincoln race, so Oscar takes Paul to the race and they each place a small sum on Daffodil, who does end up winning the race.

Oscar is impressed and in awe of his nephew’s winnings, and when he talks to Basset and Paul about the boy’s horse betting, Basset recalls how Paul started, about a year ago, and how they realized the boy was lucky. Basset claims that Paul has a gift “from heaven” that allows him to call some races, and he also reveals that Paul has made over fifteen hundred pounds. Oscar asks to see the money, and Basset shows him. Paul invites Oscar to join his partnership with Basset, and Oscar accepts after seeing the money.

After Paul’s winner takes the Leger Cup and they all make profits, Oscar expresses concern about Paul’s increasing earnings. He asks Paul what he will do with the money, and Paul explains that he wants to help his family. Paul tells Oscar about the “house whispering,” which means that the pressure the family feels that there is “never enough money” is tangible and obvious to all members of the household. They decide to give Paul’s mother some of his winnings, one thousand pounds a year on her birthday for five years. Paul doesn’t want his mother to know where the money comes from, so they send a letter saying it’s from a relative and distributed by the family’s lawyer. On her next birthday, Paul’s mother opens the letter, and he observes her reaction carefully. She is “hardened” and “expressionless.” The mother goes to meet with the family lawyer and asks if she can have the full five thousand pounds at once, and after Oscar and Paul confer, they decide to give her the sum because they feel they can make more money on their betting.

Once the mother has the full five thousand pounds, though, the whispering in the house does not die down but, ironically, gets louder. This is because the mother spends lavishly, acquiring new furniture and a private tutor for Paul. He does not “know” the winner of the next race and loses a hundred pounds; he is worried that he is losing his gift and begins to panic. Paul’s mother starts to notice that he is nervous and suggests that he go to the seaside for a vacation, but he insists that he cannot go on a vacation before the Derby. She thinks he is becoming too obsessed with the races and warns him that gambling can be destructive, as she learned from her own family. She asks him to not think so much about the races, and he tells her not to worry, but he has “a secret within a secret.” Paul’s secret is the wooden rocking horse that he is now probably too old to ride. He justifies his continued riding by telling his mother that he needs the rocking horse until he is able to ride a real horse. 

As the Derby approaches, the boy is becoming weak and anxious. His mother becomes increasingly concerned about him, and when she is at a party two days before the Derby, she has a bad feeling about Paul. She calls the nurse to check in, and Miss Wilmot says Paul was good when he went to bed. A few hours later, the mother returns home and goes to visit Paul. She sees him rocking madly on the rocking horse, and then he begins screaming about a horse named Malabar. He looks at his mother and then falls off the horse, unconscious.

Paul remains in bed for days with “a brain sickness.” On the third day, Bassett comes to see Paul, and even though the mother is not happy about it, she thinks Bassett may help Paul recover his senses. Bassett says that Malabar won the Derby, and Paul responds by telling his mother that he is lucky and asking if he ever told her so. She says that he didn’t tell her, and Paul dies that night. The story ends with Oscar’s comment that Paul may be better off dead than living a life where he has to ride his rocking horse to predict the winner of a horse race.