The Downsiders, located underneath New York City, is a secret community of an unknown population (either native-born or "fallers" from the topside) that are never allowed to travel to the Topside (the surface). Talon, a fourteen-year-old Downsider, is curious about the Topside; he travels to the Topside and meets a fourteen-year-old girl named Lindsay Matthias, who just moved to her father's NYC townhouse after her mother went to Africa with her professor for three years to study the white rhino. Things get off to a rocky beginning, but they become friends. However, when Talon brings Lindsay to the Downside, the Wise Advisors (the Downside's government) find out and sentence Talon to death by executing him in the pipe system. Talon survives; he winds up on Coney Island "under the boardwalk," and has the time of his life, experiencing the "strange Topside rituals" for the first time.
As Talon heads for the Downside, the Downsiders meet at the city hall ("Hall of Action") to try to stop the Topsiders. Railborn Skinner, Talon's former friend and the person who ratted Talon out, suggests knocking out the Topside's utilities to punish them for their "ungratefulness." Talon comes back and tells the Downsiders, who thought he was dead, that he saw the Topside; after the Wise Advisors ask Railborn what to do, Railborn orders for Talon to be sent to the Chamber of Soft Walls (the Downside mental ward).
In the midst of the events, the Topside's utilities are knocked out (which include electricity,gas,and water). However, rather than panicking, the New Yorkers decide to party instead, and the mayor passes an order that the utilities be shut down once per year in a celebration known as "The Festival of Outages". Meanwhile, Lindsay, who has gathered info about the Downside's origin, sneaks into the Downside and gives the information to Talon, hoping that it helps. At first, Talon is angry at this information; he soon, however, realizes what to do. He demands to the guard to be released and travels to the Chamber of First Runes, where only a Most-Beloved (the Downside's leader, who there is none at this point in time) is allowed in. The guards let him in after Talon demands to be let in (several times, actually; the guards did not cave easily). Talon sees the grave of Alfred Ely Beach, a forgotten inventor who created the Downside over one-hundred years ago, and after having a "conversation" with him, he leaves, knowing what to do. At the same time, a large piece of rock impales Gutta, and leaves her unconscious. Railborn carries Gutta to a hospital on the Topside, and they are both labelled wards of the state. At the hospital, Railborn does a ritual swearing he would never seek the Downside again.
Meanwhile, on the surface, Mark is being blamed for the outages. The city orders his resignation, and he signs the resignation papers after talking to Lindsay, who tries to comfort and console him. As the two share the moment, an explosion is heard and felt. The explosion is actually half of the Downside, which was destroyed, and sealed up as a result, in a plan by Talon to keep the Topsiders out. The plan works, and Talon, who is now Most-Beloved, later returns to the Chamber of First Runes and leaves Lindsay's information at Beach's grave; he sees a journal there, though as tempting as it is to read it, Talon leaves it. Upon exiting the chamber, Talon tells the guards to never let anyone (himself included) in until a new Most-Beloved arises.
Talon and Lindsay meet up again months later. Talon takes Lindsay to the top of an abandoned skyscraper; Downsiders are now living atop them, and this area is called the Highside. Talon tells Lindsay that once the Downsiders know what all the Topsiders know, they will reveal themselves. But until then, they will remain left alone. On an orphanage on Long Island, a boy and a girl name Raymond and Greta are the most beloved ki there.