Thirteen years after the original series, Timmy Turner has grown into a 23-year-old man who still clings to the playful habits of a child to keep his fairy godparents, Cosmo and Wanda, and his godbrother, Poof. His refusal to mature irritates his parents, who are eager for him to move out so they can sell the family home and explore the world, and it even catches the attention of Jorgen Von Strangle, the Fairy Godparent Academy’s stern chief instructor who schemes to tempt Timmy away from his magical companions.
One day Timmy reunites with Tootie, a childhood acquaintance who has grown into a confident activist with a long-held crush on him. Timmy secretly uses wishes to support Tootie’s protest against the felling of a historic tree, while Cosmo and Wanda desperately try to keep him from growing dependent on magic.
Timmy is torn between his love for Tootie and his desire to keep his fairies, and he hesitates to kiss her. Angered, Tootie leaves him, telling him to become more mature.
Meanwhile, Timmy's schoolteacher Denzel Crocker teams up with oil tycoon Hugh J. Magnate to kidnap Timmy's fairies and use their magic for their own gain. Magnate deceives and kidnaps Tootie while Crocker captures Cosmo, Wanda and Poof, imprisoning them in a device programmed to use their magic to grant anybody's wishes. However, Magnate betrays Crocker, wishes he falls into a bottomless ballpit, and tortures the fairies by adjusting the wish-granting machine to electrocute them each time a wish is made.
Timmy tracks Magnate's headquarters, which resembles a children's entertainment center, to rescue his fairies and Tootie. He battles both Magnate, who apparently had a troubled relationship with his father and struggles with his own maturity, and a toy robot brought to life with the fairies' magic. Timmy saves his fairies from being destroyed by Magnate as he tells Tootie he loves her and kisses her, but in doing so, loses ownership of his fairies, who disappear out of containment. Magnate laments losing his source of magic before his secretary Janice incapacitates him.
Although Timmy is saddened by Cosmo, Wanda, and Poof's departure, he is happy to be free to finally pursue more mature endeavors, as he had longed to do. Jorgen Von Strangle returns to inform Timmy that, because of his courage, a new law was passed in Fairy World that will now permit him to keep his fairy godparents as long as he only makes unselfish wishes to help others. Tootie, Timmy, and the fairies form a charity organization to grant wishes that will mend all of the world's problems or travesties, flying away in a magical van, which turns around in midair and flies towards the camera. Magnate is sent to a mental hospital after claiming that fairies exist, and Janice becomes CEO of the company, turning it into an environmentally-friendly enterprise. Crocker finally falls out of the ball pit onto the Turners' front lawn, where Mrs. Turner is “vacationing” to celebrate Timmy moving out, and frustratedly walks away.
