In the summer of 1929, Mrs Walker takes her five children - John, Susan, Titty, Roger and baby Vicky - on holiday in the Lake District. The children find 'Swallow', a dinghy, and ask to set up camp on a nearby island in the lake. Mr Walker, currently on a Navy destroyer travelling to Hong Kong, sends a telegram giving his permission, and John and Susan, the two eldest, take charge of organising their trip. The next day they set sail with Titty and Roger while Mrs Walker stays home to look after Vicky.

On the island they look for a suitable base camp, and Roger finds a clearing in the forest. Although an old fire shows that it has been used before, they decide to stay. John and Titty look for a less exposed harbour to birth Swallow and find a good spot, one that someone has already marked with a cross on a tree trunk. While having lunch the next day, they hear a loud bang from the nearby houseboat and see a dinghy named 'Amazon', under a pirate flag, sailing away. The children get into Swallow and try to follow the other dingy and are spotted by the houseboat's owner, who shakes his fist at them. They lose sight of Amazon and, after getting provisions on the mainland, return to camp where they are shot at with arrows. The Blackett sisters, Peggy and Nancy, emerge from their hiding places armed with bows, declaring that the Walkers have been using the Amazons' camp. The two groups decide to join forces against the Blacketts' Uncle Jim, who lives in the houseboat and no longer wants to play with the girls as he is busy writing a book. To decide who will be the leader they agree to a challenge - whoever manages to steal the other's dinghy wins.

The next day there is no wind so the children go to the mainland and meet the charcoal burners, Young Billy and his father, and their pet adder. Young Billy asks the children to let Uncle Jim know that some in the village may want to burgle the houseboat. Back at the camp Uncle Jim has left a note for the Walker children, asking them to leave him alone - he blames them for the firework that was actually let off on his houseboat by his nieces. John rows over to the houseboat to pass on the warning about burglars but Uncle Jim is so angry that he won't listen to him.

That afternoon, Titty is left in charge of the camp while the others board Swallow to try and catch the Amazons by surprise, but the girls are waiting for them and head over to the Walkers' camp. Mrs Walker comes over for a visit and make Titty some tea before leaving. Swallow gets caught up in reeds and, as darkness falls, the children find a place to moor and pass the night there, leaving Titty alone on the island. When she hears the Blacketts arrive, Titty hides and then steals the Amazon, passing the night in the dinghy on the water. During the night she sees two men hiding Uncle Jim's chest on an island.

The next morning the Amazon and Swallow meet on the water and head back to the camp, where the Blacketts agree that the war is over and the Walkers have won. John goes home to apologise to his mother for staying out all night and leaving Titty on her own. Back at the camp, Uncle Jim brings the police, accusing the Walkers of stealing the chest holding his manuscript. The Blacketts admit that they let off the firework on the houseboat and that the Walkers couldn't have taken the chest as they were sleeping in 'Swallow' all night. Uncle Jim apologises and agrees to play pirates with the children the next day.

In the morning Titty and Roger recover the chest and give it back to Uncle Jim after making him walk the plank. He makes tea for the children and gives Titty his pet parrot to look after until the next Summer.