Warning: Wikipedia contains spoilers.
The Tin Woodman and the Scarecrow are regaling each other with tales at the former's palace in the Winkie Country when a Gillikin boy named Woot wanders and is welcomed into their presence. After he's fed and rested (which the Tin Woodman and the Scarecrow, not being flesh and blood, don't need), Woot asks the Woodman how he became all tin. He relates how the Wicked Witch of the East enchanted his axe and caused him to chop his body parts off limb by limb because he was in love with her ward, Nimmie Amee. Each chopped limb was replaced by the tinsmith Ku-Klip with a counterpart made of tin. (Since Oz is a fairyland, no one can die, even when the parts of their body are separated from each other.)
However, without a heart, the Tin Woodman felt he could no longer love Nimmie Amee and therefore he left her. He relates how Dorothy and the Scarecrow found him after he'd rusted in the forest (an event related in The Wizard of Oz) and went with him to the Emerald City where the Wizard gave him a heart. Woot poses that the heart may have made him loving, but it didn't make him kind—he would have returned to Nimmie Amee if he did. This shames and inspires him to journey to the Munchkin Country and find her.
The Tin Woodman, the Scarecrow, and Woot journey into the Gillikin Country and encounter the inflatable Loons of Loonville, whom they escape by popping several of them. They descend into Yoop Valley, where a giantess dwells who transforms the travellers into animals for her amusement, just as she already did to Polychrome, the Rainbow's Daughter. Woot's ingenuity is stealing one of Mrs. Yoop's sources of magic power enables the four to escape. Woot, as a green monkey, narrowly avoids becoming a jaguar's meal by descending further into a den of subterranean dragons. After escaping that ordeal, Woot, the Tin Woodman as a tin owl, the Scarecrow as a straw-stuffed bear, and Polychrome as a canary turn south into the Munchkin Country and, with Polychrome's magic, reverse a spell cast on Tommy Kwikstep, a messenger boy who thoughtlessly wished himself twenty legs.
They arrive at the farm of Jinjur, who first attacks what she thinks are ravening wild beasts (an act in itself strange in Oz, where birds and beasts talk and think) and then renews her acquaintance with them and sends to the Emerald City for help. Dorothy and Ozma arrive and Ozma easily restores the Scarecrow and the Tin Woodman to their rightful forms. Polychrome takes several steps to restore to her true form. However, Ozma discovers that the Green Monkey that Woot is transformed into has to be someone's form; it cannot be rid of. Polychrome suggests as a punishment for wickedness that Mrs. Yoop the giantess be made into the Green Monkey, and Ozma thus succeeds in restoring Woot to his proper form.
The Tin Woodman, the Scarecrow, Woot, and Polychrome resume their quest and come upon the spot that the Tin Woodman stood rusted—to find another tin man! After they oil his joints, he identifies himself as Captain Fy-ter, a soldier who courted Nimmie Amee after the Woodman had left her. The Wicked Witch of the East made Fy-ter's sword do what the Woodman's axe did—cut off his limbs, which Ku-Klip replaced with tin limbs. He didn't have a heart either, but it didn't bother Fy-ter. However, he could rust, which he one day did during a rainstorm. Both tin men now seek the heart of Nimmie Amee, and they agree to let her choose between them.
The five come to the dwelling of the tinsmith Ku-Klip where the Tin Woodman talk to himself—that is, the head of the man (Nick Chopper) he once was. The Tin Woodman and the Tin Soldier also find a barrel of assorted body parts that once belonged to each of them, but some, like Captain Fy-ter's head, are conspicuously missing. Ku-Klip reveals that he used Fy-ter's head and many body parts from each of them (which never decayed) to create Chopfyt for an assistant. Chopfyt complained about missing an arm until Ku-Klip made him a tin one, and he departed for the east.
The companions leave Ku-Klip and continue east themselves to find Nimmie Amee and find themselves crossing the Invisible Country, where a massive Hip-po-gy-raf helps them across in return for the Scarecrow's straw. Reluctantly, he gives it and consents to being stuffed with available hay, which makes his movements awkward. They rest for the night at the house of Professor and Mrs. Swynne, pigs whose nine children live in the Emerald City under the care of the Wizard.
They leave the Swynnes and arrive at the foot of Mount Munch on the eastern border of the Munchkin Country. At its summit is a cottage where a rabbit tells them Nimmie Amee now lives, who seems quite happy. However, the cottage is surrounded by a wall of hardened air which they cannot penetrate. Polychrome with her magic shrinks them to fit into the rabbit's burrow and travel under the wall. Restoring them to normal size, the Tin Woodman and Tin Soldier knock and are admitted by Nimmie Amee, who is now married herself—to Chopfyt, Ku-Klip's erstwhile assistant made of their human body parts. She refuses to leave her domestic life, even to become Empress of the Winkies (which she would become as the Tin Woodman's wife). "All I ask is to be left alone and not be disturbed by visitors."
Satisfied and respectful, they leave the cottage during a rainstorm, are reduced in size and restored again, and Polychrome on a rainbow leaves the tin men and the Scarecrow to be cared for by Woot, who doesn't rust or get soggy or moldy. The four return to the Emerald City and relate their adventures; Woot is allowed free rein to roam where he pleases, Captain Fy-ter is dispatched by Ozma to guard duty in the Gillikin Country, and the Tin Woodman and Scarecrow return to his palace in the Winkie Country where this story began.
The Tin Woodman of Oz also provides backstory for Oz itself; it wasn't always a fairyland, and became one by being enchanted by the Fairy Queen Lurline, who left a fairy behind to rule it. In Glinda of Oz Ozma says that she herself was that fairy, though in The Marvelous Land of Oz we are told of her restoration to a throne long held by her ancestors.
In any event, this novel marks a clear maturation of Ozma's character, now said to appear significantly older than Dorothy (in Ozma of Oz they appeared the same age) and a fairy working her own innate magic.