Three years after the events of Prince Caspian, Lucy and Edmund Pevensie are staying with their irritating bookworm cousin Eustace Scrubb until the war is over, separated from Peter and Susan Pevensie. Edmund is still too young to enlist in His Majesty’s Armed Forces. At their cousin’s home, a painting of a ship on the ocean transports Lucy, Edmund and Eustace into an ocean in Narnia. They are rescued by Caspian, who captains the Dawn Treader. He invites them on a voyage to rescue the seven Lords of Narnia whom his uncle Miraz banished. In the Lone Islands, where people are sold as slaves, Caspian and Edmund are captured and imprisoned while Lucy and Eustace are sold as slaves. Caspian meets one of the lost lords (Lord Bern), who reveals that the slaves are not sold, but sacrificed to a mysterious green mist. They are rescued by their crew. Bern, who becomes the new governor, gives Caspian a sword, one of seven given to each of the lords by Aslan.
At another island, Lucy is abducted by the invisible Dufflepuds who force her to enter the manor of the magician Coriakin to find a visibility spell. She does so, and later introduces him to her friends. Coriakin encourages the crew to defeat the mist by laying the lords’ seven swords at Aslan’s Table on Ramandu’s island, but warns them that they are about to be tested, through temptation. Lucy recites a beauty incantation she found, and enters a dream in which she has transformed into Susan and neither Lucy nor Narnia exist. Aslan chides Lucy for her self-doubt, explaining that her siblings only know of Narnia because of her, telling her “don’t run away from who you are”.
Another sword is recovered from a magical pool that turns anything that touches it into gold, including one of the lost lords (which leads to a massive fight between Edmund and Caspian). Meanwhile, Eustace finds, and steals from a rock pit full of treasure. While Edmund and Caspian look for Eustace, they discover the remains of another of the lords and recover his sword. A dragon approaches and is driven away from the Dawn Treader. The dragon is revealed to be Eustace, transformed by the treasure after succumbing to its temptations. Reepicheep befriends Eustace, and Eustace is touched by the mouse’s kindness. He undergoes a change of heart and becomes helpful to the crew.
The crew arrive at Aslan’s Table to find three lost lords sleeping. As they place the swords on the table they realize one is still missing. A star descends from the sky and transforms into Lilliandil, a beautiful woman who guides them to the Dark Island, lair of the Mist, where they discover the last surviving Lord, Rhoop. Edmund’s fear manifests itself as a monstrous sea serpent that attacks the ship. Eustace fights the serpent, but Rhoop wounds him with the last sword, causing him to fly away with the sword impaled in his side. He encounters Aslan, who transforms him back into a boy, removes the sword from his body and sends him to Ramandu’s island with it. As the crew fights the serpent, the Mist tries to distract Edmund by appearing as Jadis, the White Witch. Eustace reaches the table and fights through the Mist to place the sword upon it, allowing the swords to unleash their magic and bestow Peter’s sword (which Edmund was in possession of) with the power to slay the sea serpent, the death of which awakens the three sleeping lords, destroys the Mist and Dark Island and liberates the sacrificed slaves.
Eustace rejoins Lucy, Edmund, Caspian and Reepicheep, and they sail to a mysterious shore before a massive wave. Aslan appears and tells them that his country lies beyond, although if they go there they may never return. Caspian refuses, knowing that he has more duties to do as king, but Reepicheep is determined to enter, and Aslan blesses him before he paddles beyond the wave. Aslan opens a portal to send Lucy, Edmund and Eustace home, but informs Lucy and Edmund they have grown up and can never return to Narnia. Aslan encourages them to know him in their world by another name, and tells a reformed Eustace that he may return. The three enter the portal and swim up to the bedroom. Eustace hears his mother announcing a visitor, Jill Pole. The three leave the room, stopping to look back at the painting, which shows the Dawn Treader sailing out of sight.