One evening, whilst Mortimer “Mo” Folchart (Brendan Fraser) and his wife Teresa “Resa” Folchart (Sienna Guillory) are reading the fairy tale “Little Red Riding Hood” to their baby daughter Meggie, a red velvet hood appears out of nowhere. Twelve years later, Meggie (Eliza Bennett) travels with her father Mo to visit an old book shop somewhere in Europe, unaware that he is secretly looking for a copy of the book, Inkheart. Shortly after finding one, Meggie comes across a marten with horns outside the shop, who tries to bite her fingers. Suddenly, a man (Paul Bettany) appears from the shadows, claiming to be an old friend while revealing the marten’s name as Gwin. When Mo comes out of the book shop, he quickly recognizes the man as a person called Dustfinger, whom quickly asks to be read back into the book, only for Mo to flee with Meggie from him.
Travelling to Italy, Mo takes Meggie on a visit to Meggie’s great aunt Elinor (Helen Mirren), whereupon he reveals to Meggie why he fled from Dustfinger. Nine years earlier, Mo read to her from Inkheart, inadvertently freeing Dustfinger as a result, due to a gift he possessed from birth, that marks him as a “Silver Tongue”. Unfortunately, his gift also freed the book’s villain Capricorn (Andy Serkis) and several of his henchman, but at the same time, losing Resa after being forced to flee with his infant daughter. Soon, Dustfinger reappears, accompanied by Capricorn’s minion, Basta (Jamie Foreman), who quickly captures Mo and his family and takes back Inkheart, destroying Elinor’s valuable library in the process.
The four are taken to Capricorn’s new castle in the real world. Elinor stands up to Capricorn and protests against the destruction of her library, but Capricorn orders her to be gagged. Mo is forced to read from the book, and they are imprisoned in the stables, which house various creatures from different storybooks, including the winged monkeys from The Wonderful Wizard of Oz, the minotaur from the story of Theseus, and a unicorn. During their imprisonment, Mo explains to Meggie and Elinor about his gift, stating that when he reads a person or an object out of a book, someone from the real world is sent into it, hence why his wife disappeared. Capricorn, interested in using his gift, forces Mo to read out items from books, causing him to get a stash of treasure from one of the stories in The Arabian Nights, while causing one of the 40 Thieves, named Farid (Rafi Gavron), to be brought out as well and forced into imprisonment. Dustfinger, who believed he could get his chance to return into the book, is betrayed by Capricorn, and so prompts a quick escape using the famous tornado from The Wonderful Wizard of Oz; during the escape, he opts not to tell Mo that his wife Resa is in the village, but has lost her voice.