Dorothy is a farm girl who is allowed to roam the local meadows and woods and play to her heart's content. She has the rare ability to understand and speak the language of the animals. The kind-hearted child makes friends with Bun Rabbit, and learns about his life and experiences. Bun Rabbit once modeled for Santa Claus, so that Santa could make stuffed bunnies for "the babies" to play with. The rabbit had traveled with Santa to his castle at the North Pole, and stayed for several days to admire Santa's craftsmanship. While there, the bunny was fed clover, turnips, and sliced cabbage by old Mother Hubbard, who keeps house (or castle) for Santa. The toy bunnies Santa created in Bun Rabbit's likeness were so accurate that Bun almost mistook one for a live creature.
Bun Rabbit chose to walk home from the North Pole, to see the countryside; Santa equipped him with a magic collar that kept the rabbit from harm. The collar melted away and disappeared once Bun Rabbit reached home.
This is one of the minority of fables in Baum's collection in which animals talk. In "Hickory, Dickory, Dock," the mice speak only to each other; in "The Black Sheep," humans and animals can understand each other's speech as a matter of course. "Little Bun Rabbit" steers a middle course between these extremes, in that Dorothy's ability to understand animal speech is a special gift. In "Pussy-cat Mew," the cat talks to another cat and to her mistress.