Mr. and Mrs. Darling go out, leaving their children under the protection of their dog, Nana. A young boy appears in the room, but before Nana can catch him, he flies out the window. She grabs his shadow, however, which Mrs. Darling finds and tucks away in a dresser drawer.

When the children are asleep, a fairy, Tinkerbell, and Peter Pan fly in. They recover Peter’s shadow, but he can’t stick it back on. Wendy wakes up and sews it in place.

Peter invites Wendy and the boys back to his home in Never Never Land, to meet his followers, the Lost Boys. Unfortunately, the Lost Boys’ enemies, the Pirates led by captain Hook, intend to kill Peter. Hook has discovered the boys’ secret hideout and is about to do his worst, when he hears the tick-tock of the clock from within his own sworn enemy, the Crocodile. The Indians appear, led by Tiger Lily, and they head off on a pirate hunt. When the boys shoot down a strange bird in the sky, it turns out to be Wendy, so they bring her inside to make her well. Tinkerbell becomes jealous when the boys build Wendy a house, hoping she will become their mother. The boys wish they had parents, too, and Wendy offers them her own. They all want to go to Wendy’s home – except, Peter – so Wendy plans to go back to Never Never Land once a year to spring clean for him. Hook captures the boys one by one and poisons Peter’s drink, which Tinkerbell swallows instead. She can only be restored to health if all who believe in fairies clap their hands. On board the pirate ship, Peter rescues the boys and Wendy, and Hook is finally consumed by the Crocodile.

Back home, the Darlings and Nana have been waiting. One night, Wendy returns through the open window and the Darlings joyfully adopt the Lost Boys, who she has brought with her.

Years pass and Peter reappears at the window. He wakes Wendy, who is now grown up with her own child and can’t go to spring clean. But her daughter, Jane, can and she flies away with Peter as the curtain falls.