In the nursery of the Darling home located in Edwardian era London in 1904, Wendy Darling tells her younger brothers John and Michael stories about a boy called Peter Pan and his fairy friend Tinker Bell. Life is disrupted when their Aunt Millicent intervenes. Judging Wendy to be an “almost” full-grown woman, Aunt Millicent advises Mr. and Mrs. Darling to think of Wendy’s future, saying that Wendy should spend less time in the nursery, and more time with herself, to become a grown woman. The very idea terrifies the children.
Wendy daydreams about having seen Peter in the night, and along with the family’s “nurse” dog Nana, embarrasses her father in front of his superiors. As a punishment, Mr. Darling chains Nana outside and declares it time for Wendy to grow up. Peter visits the nursery again looking for his shadow, which Nana had bitten off, and introduces himself. After being acquainted, Wendy sews his shadow back on and is enchanted by Peter’s tales of his adventures in Neverland. She asks Peter if she can kiss him, but because he does not know what a kiss is, ends up giving him a thimble instead. He returns the “kiss” by plucking an acorn from his shirt and giving it to her. Peter invites her to be “mother” to his gang of Lost Boys. She asks to bring her brothers, John and Michael, to which Peter agrees. He grabs Tinker Bell and shakes fairy dust on the children and tells them to think of happy thoughts. Nana, having escaped her chain, leads Mr. and Mrs. Darling back home, but they arrive too late to stop the children.
The Children fly over London and then to Neverland. They spy on Captain Hook’s(Isaacs) ship from a cloud. The pirates spot them and attack with their cannons. One knocks Wendy far away and the other causes Michael and John to fall towards the island below. Peter tells Tinker Bell to find Wendy and take her back to the hideout while he gets the boys. But Tinker Bell reaches the hideout without Wendy and out of jealousy, tricks the Lost Boys into shooting Wendy with an arrow. The boys learn the truth and confess to Peter but Wendy is revealed not to have been killed as the arrow hit the acorn necklace hung around her neck. Angry, Peter banishes Tinker Bell and ends their friendship. When Wendy finally awakens she finds the Lost Boys on their knees begging her to be their mother, which she accepts. They blindfold her and lead her to their hideout, and she finally realizes her brothers are missing. Michael and John stumble across the crocodile that ate Hook’s hand then encounter the Native American princess Tiger Lily (Carsen Gray). All three are then captured by Hook and taken to the Black Castle to use as bait for Peter Pan. Wendy and Peter visit the mermaids’ lagoon to ask the dark and mysterious creatures to help in locating John and Michael, and learn that Hook has her brothers. Peter and Hook engage in a duel but it is stopped when the ticking crocodile arrives scaring the pirates off and allowing the children to all escape.