Yellow Sky begins with a gang of outlaws led by Stretch (Gregory Peck), who are attempting to rob a bank. When the heist goes horribly wrong, the gang is forced to run. Stretch suggests travelling across the desert, which the rest of the gang reluctantly agrees to.After much wandering, the gang finally arrives at a small ghost town named "Yellow Sky" where they decide to stay temporarily. Unfotunately, they are unexpectedly greeted by "Mike" (Anne Baxter), a tough young woman who does not take their presence lightly. Eventually, she relents and allows them to remain, and they find out she is the daughter of a prosepector.One of the gang members, Dude (Richard Widmark), soon begins to suspect the possibility that the prospector is hiding gold, and begins leading his men to the belief that they should find it and take it for themselves. Stretch objects, but is unable to pursuade his gang otherwise.Eventually, things get out of control, and a huge showdown occurs in which all but two of Stretch's gang are killed. The surviving members of the gang finally reconcile and decide to reform themselves.Stretch returns to the bank a few days later, seemingly committing another hold-up, only to return the money that he had taken. He returns to Yellow Sky where he joins Mike, the prospector, and the two remaining outlaws as they ride away.