Set almost a decade after Rainbow Valley, Europe is on the brink of the First World War, and Anne's youngest daughter Rilla is an irrepressible almost-15-year-old, excited about her first adult party and blissfully unaware of the chaos that the Western world is about to enter. Her parents worry because Rilla seems not to have any ambition, is not interested in attending college, and is more concerned with having fun. (In an aside, it is revealed that Marilla has died; her date of death is not specified but Rilla states it was before she was old enough to know her very well.)
Once the Continent descends into war, Jem Blythe and Jerry Meredith promptly enlist, upsetting Anne, Nan, and Faith Meredith (who Rilla suspects is engaged to Jem). Rilla's brother Walter, who is of age, does not enlist, ostensibly due to a recent bout with typhoid but truly because he fears the ugliness of war and death. He confides in Rilla that he feels he is a coward.
The enlisted boys report to Kingsport for training. Jem's dog, Dog Monday, takes up a vigil at the Glen train station waiting for Jem to come back. Rilla's siblings Nan, Di, and Walter return to Redmond College, and Shirley returns to Queen's Academy, leaving Rilla anxiously alone at home with her parents, their spinster housekeeper Susan Baker, and Gertrude Oliver, a teacher who is boarding with the Blythes while her fiance reports to the front.
As the war drags on, Rilla matures, organizing the Junior Red Cross in her village. While collecting donations for the war effort, she comes across a house where a young mother has just died with her husband away at war, leaving no one to care for her two-week-old son. Rilla takes the sickly little boy back to Ingleside in a soup tureen, naming him "James Kitchener Anderson" after his father and Herbert Kitchener, British Secretary of State for War. Rilla's father Gilbert challenges her to raise the war orphan, and although she doesn't like babies at all, she rises to the occasion, eventually coming to love "Jims" as her own. She also assists in the elopement of a soldier whose beloved is the daughter of the town's only vocal pacifist; the pacifist's attempts to oppose fund-raising for the war effort or to criticize the war while leading prayers are a recurring minor storyline.
Rilla and her family pay anxious attention to all the war news as the conflict spreads and thousands die. Rilla grows much closer to Walter, who some townsfolk and fellow students have branded a slacker, an insult he feels deeply. Rilla feels that Walter finally regards her as a chum, not just as his little sister. Walter eventually does enlist, as does Rilla's newfound love interest, Kenneth Ford (the son of Owen and Leslie Ford, who met in Anne's House of Dreams), who kisses her before leaving and asks her to promise she will not kiss anyone else until he returns. She keeps this a secret for much of the book, unsure what it means about his feelings for her. Her mother later tells her that "if Leslie Ford's son asked you to keep your lips for him, I think you may consider yourself engaged to him."
As the war continues, one night Dog Monday begins to howl inconsolably, leading the family to fear something terrible has happened to Jem. Instead, they receive news that Walter was killed in action at Courcelette. (In Anne of Ingleside, published in 1939 but set many years before Rilla of Ingleside, Montgomery foreshadows Walter's death; Anne sees the shadow of a cross cast from the window over sleeping Walter's head.) In Walter's last letter to Rilla, written the day before his death, he tells her that he is no longer afraid and believes it may be better for him to die than to go on living with his memories of war forever spoiling life's beauty. Rilla gives the letter to Una Meredith, as she has long believed Una had been in love with Walter, though she had never spoken of it to either of them.
Anne's youngest son, Shirley, comes of age and immediately joins the flying corps. Jerry Meredith is wounded at Vimy Ridge, and in early May 1918, Jem is reported wounded and missing following a trench raid. The Blythes spend nearly five months not knowing Jem's fate, but are encouraged by Dog Monday's continued presence at the train station, as Susan reasons a dog so troubled by the death of his master's brother surely would sense a tragedy involving his master. Finally the family receives a telegram: Jem had been taken prisoner in Germany, but eventually escaped to Holland and is now proceeding to England for medical treatment.
When the war finally ends, the rest of the boys from Glen St. Mary return home. Mary Vance and Miller Douglas announce plans to marry, with Miller deciding to pursue a career in Mr. Flagg's store after losing a leg in the war. Jem returns on an afternoon train and is met by a joyful Dog Monday. Jims' father returns with a young English bride and takes Jims to live with them nearby; Rilla is glad she can still remain part of Jims' life.
Life after war resumes. Jem plans to return to college, since he and Faith cannot be married until he finishes studying medicine. Faith, Nan, and Diana plan to teach school, while Jerry, Carl, and Shirley will return to Redmond, along with Una, who plans to take a Household Science course. Noting that Kenneth Ford has survived the war but has not contacted her, Rilla concludes that his interest must have faded and she should consider joining the college-bound group.
Finally, Kenneth returns home and proposes to Rilla with the question "Is it Rilla-my-Rilla?" to which Rilla lisps, "Yeth," a rare slip into her childhood habit.
Output: Who does Rilla suspect is engaged to Jem?