In 1947, a banker named Andrew "Andy" Dufresne is convicted of murdering his wife and her lover, based on strong circumstantial evidence. He is sentenced to two consecutive life sentences at Shawshank State Penitentiary in Maine, run by Warden Samuel Norton.
Andy is quickly befriended by Ellis Boyd "Red" Redding, a fellow inmate serving a life sentence who has recently failed to gain parole. Andy finds Red has connections on the outside who can acquire contraband for the inmates, and first asks Red for a rock hammer in order to maintain his rock collection hobby, which he uses to fashion a home-made chess set. He later asks Red for a full-size poster of Rita Hayworth for his wall, replacing them over the years with ones of Marilyn Monroe and Raquel Welch.
During manual labor, Andy overhears Captain of the Guards Byron Hadley complain about having to pay taxes on a forthcoming inheritance. Andy risks punishment by explaining to Hadley how to circumvent the taxes legally; Hadley accepts Andy's advice and rewards his friends with a brief respite and beer. Andy's financial advice is soon sought by other guards at Shawshank and nearby prisons, and Andy is given a space to work on their financial matters under the pretense of maintaining the prison library alongside elderly inmate Brooks Hatlen.
Hadley delivers a brutal beating to inmate Bogs, leader of "The Sisters," after his gang's attempt to sexually assault Andy puts Andy in the infirmary; Bogs is paralyzed, and the remaining Sisters leave Andy alone.
Andy is able to use his goodwill with the guards to help expand the library; when one donation to the library provides him with the opera The Marriage of Figaro, he plays it over the public address system for all the inmates to hear, well-aware of the punishment of solitary confinement he will receive for the brief moment of bliss.
Warden Norton eventually creates a scheme to use prison labor for public works, undercutting the cost of skilled labor and discreetly receiving personal kickbacks for it. Norton has Andy launder the money under a false identity, in exchange for allowing Andy to keep his private cell and to continue maintaining the library.
Brooks, freed on parole, is unable to adjust to the outside world, and hangs himself; Andy dedicates the expanded library to him.
In 1965, Tommy Williams is incarcerated into Shawshank on robbery charges. Tommy is brought into Andy and Red's circle of friends, and Andy assists Tommy into getting his GED. Tommy, upon learning of Andy's crime, reveals that one of his old prison-mates, Elmo Blatch had claimed to have committed a murder just like the one with which Andy was charged. Norton, fearing that Andy might expose his illegal activities if he were released, puts him into solitary confinement and has Tommy killed by Hadley, claiming he was an escapee.
When Andy is finally released from solitary, Norton threatens to destroy the library if Andy does not continue to launder the money for him.
Shortly after, Andy informs Red of his dream of living in Zihuatanejo, a Mexican-Pacific coastal town, and instructs Red, should he ever be freed, to visit a specific hayfield near Buxton to find something he had left there.
The next day at roll call, Andy's cell is found empty. Norton, in anger, throws one of Andy's rocks at the poster of Welch; the rock tears through the poster, revealing a tunnel that Andy had dug with the rock hammer over the last two decades that allowed him to escape Shawshank, along with a set of civilian clothes, his chess set, and the books he had kept for Norton, having swapped them for fakes the night before. Andy uses his false identity to withdraw all of Norton's money from the bank at the same time, sending the evidence to a local newspaper. On the day the story runs, the police converge on the prison; Hadley is arrested while Norton commits suicide.
When Red finally achieves parole after serving 40 years of his sentence, he finds himself in the same bagging job at a grocery store as Brooks, and living in the same apartment where Brooks committed suicide.
Red decides to follow Andy's advice and visits Buxton. In the hayfield where Andy specified, he finds a cache of money and a note left by Andy, reminding him of Zihuatanejo. Red violates his parole and travels to Mexico; he eventually meets Andy on a beach, and they happily reunite.
