In 1943, dollmaker Samuel Mullins and his wife Esther grieve for the loss of their seven-year-old daughter Annabelle (Bee), who died after she was run over by a passing car. An unknown entity, which the couple believes to be their daughter’s spirit, convinces them to transfer its essence into one of Samuel’s crafted porcelain dolls. Their elation soon turns to anguish when the Mullins realize they have attracted a demon looking for a human host. They take the doll to Bee’s room and lock it in a closet wallpapered with pages from the Bible before hiring priests to bless both the room and the house.
Twelve years later, in 1955, the Mullins open their home to provide shelter for Sister Charlotte and six girls left homeless by the closing of their orphanage. That first night, Janice, a young orphan crippled by polio, awakens and sneaks into Bee’s bedroom, which has mysteriously become unlocked. She finds a key for Bee’s closet and unlocks it, unwittingly releasing the demon, who begins to terrorize the girls, displaying a special interest in Janice.
On the second night, the demon continues to torment Janice, who attempts to get away using a stairlift. Janice is left severely injured when caught by the demon and thrown from the second floor landing to the first floor. The next day, Janice—now confined to a wheelchair—is dragged into a shed. The demon, taking Bee’s form, successfully possesses her. One of the other orphans, Janice’s best friend Linda, notices changes in her behavior and admits to Samuel that Janice had snuck into Bee’s room and found the doll two nights earlier.