The Rum Diary is Hunter S. Thompson's first novel. Written when he was still honing his skills, this novel shows peeks of the brilliant musical writing style Thompson would become known for later in his career. The plot showcases a young writer who finds himself in the virgin territory of San Juan, Puerto Rico writing for a paper that is months from going under. This writer, Paul Kemp, comes to Puerto Rico with the hope of finding adventure, but instead finds love, jealousy, and violence, all pickled in rum. It is a volatile story that will please Thompson's new and old fans alike.

Paul Kemp gets drunk before boarding the plane to Puerto Rico in order to better endure the flight. Before he boards, he sees a beautiful girl who he would like to meet boarding the same plane. Paul rushes to grab the only two open seats side by side in order to entice the girl to sit beside him, but an old man takes the seat Paul has saved for the girl. Paul attempts to move the man and is accused of battery. The girl gets away, setting the tone for Paul's entire night. Once Paul arrives in San Juan and settles in his hotel, he goes out to find a restaurant for dinner, but cannot find a suitable one. Paul decides to go to the offices of the paper he has come to work for, The San Juan Daily News.

At the office, Paul meets a photographer, Richard Sala. Sala takes Paul to a local bar that serves hamburgers for dinner and introduces him to couple of the other reporters who work at the paper. One of these is Yeamon, a tall, volatile man. Sala warns Paul that Yeamon is trouble. Yeamon, it turns out, knows the girl Paul saw on the plane. The girl, Chenault, is Yeamon's girlfriend. Despite this setback, Paul and Yeamon hit it off. Over the next few days, Paul settles in at the paper and makes friends with a number of the other people working there. Paul also becomes friendly with a local public relations man named Sanderson. However, Paul discovers that his new boss is a paranoid man who does not have the respect of his employees. Due to this, the paper is run with little supervision and is constantly rumored to be about to fold. Paul is told not to get too comfortable.

Paul visits Yeamon and Chenault at their home in the country one morning and finds them swimming in the ocean in the nude. Paul is struck by the easy rapport between these two and is jealous not only of their rapport, but their youth and simple happiness. Paul leaves and returns a short time later. Chenault makes everyone breakfast and Paul finds himself even deeper drawn to her beauty and her wit, even as he watches the control and lack of respect Yeamon showers on her. A few weeks later, Paul is drawn into a fight between Yeamon and their boss. Yeamon has written a piece on the immigration of Puerto Ricans to New York. This piece is twenty-four pages long and virtually useless to the newspaper. The boss threatens to fire Yeamon when he refuses to edit it. Then the boss gives the piece to Paul and tells him to edit it. However, upon reading the piece, Paul decides that it should be run in a five part series, refusing to edit it. The boss becomes enraged and fires Yeamon anyway.

Paul and Sala go to visit Yeamon a few days later to see how he is doing without a steady income. Sala and Paul witness Yeamon hitting Chenault before the three of them take off to have a few drinks at a local bar that Yeamon insists will give him credit. However, once they have shared in more than ten dollars of rum, the manager of the bar insists they pay their bill. Yeamon refuses and will not allow Sala or Paul to pay either. The three of them leave only to be chased down by the bar's customers and local police. A brawl erupts and the three men are beaten severely before being taken into police custody. At court later that night, the cops lie and say that Paul, Sala, and Yeamon started the brawl. Sanderson shows up and drops a few influential names that persuade the judge to set bail for all three.

In exchange for Sanderson's help in court, Paul takes on several writing assignments for a couple of Sanderson's clients. One of these requires Paul to travel to a small nearby island where a businessman is preparing to put up a resort. Afterward, Paul goes to St. Thomas to meet Yeamon and Chenault at carnival. Carnival is a loud and out of control party in town, so Paul and his friends go out to the pier to find a quieter party among the yachts. Someone suggests they go to a party at a house on the outskirts of town. When they arrive, Chenault goes off to dance with some of the locals. Before Paul and Yeamon know what is happening, Chenault is whisked off with some men who clearly have perverted intentions. Paul and Yeamon try to rescue Chenault, but are stopped by the locals. The next day, they go to the police, but find little help there. Paul and Yeamon decide to go home and hope for the best.

Paul goes back to work trying not to think about Chenault and what might have happened to her. One night, Chenault arrives on his doorstep, clearly disturbed by what happened to her on the island. Paul takes her in, telling himself he will send her back to Yeamon the next day. However, Paul cannot make himself send her away. When Yeamon finds out about Chenault's return, he renounces his attachment to her. Paul and Chenault become lovers.

A few days later the paper folds. The reporters are so angry that they track the boss down at a party and attack him, intending to do him bodily harm for leaving them all destitute, Yeamon included. The boss wards off their attack only to die of a heart attack a few minutes later. Yeamon and another reporter led the attack and are accused of causing the death. Paul helps Yeamon escape the island before making plans to leave himself, going to New York to be with Chenault.