One spring day a young brother and sister, Paul and Maureen Beebe, come to Assateague with their grandfather, a pony rancher from nearby Chincoteague Island. While exploring the beach they find a mysterious white “bone,” which Paul claims is part of the Spanish galleon that sunk there many years before. He imagines the galleon thrashing in the storm and sinking and teases Maureen that the ship’s skeleton is still under the beach. As she worries that they should not be in the “ship’s graveyard,” a group of ponies, led by the stallion Pied Piper, rushes into view. Paul and Maureen flatten themselves onto the sand, hoping the ponies will not see or smell them. They watch as the Pied Piper herds his band to the field at the top of the beach and begins to graze, the mares and younger horses following his lead.

The children hope to spot “the Phantom,” a legendary mare who for two years has evaded the men who come to Assateague for the annual pony roundup. She is said to be copper colored, with a white marking that looks like a map of the United States, and to be wily, able to outsmart both humans and other horses.