Sarah Williams, portrayed by Jennifer Connelly, is a teenager whose vivid imagination and passion for fantasy stories lead her to enact her favorite tale, Labyrinth. One day, while playing in the park near her home, she loses track of time and realizes she's an hour late to babysit her baby stepbrother, Toby (Toby Froud). After an argument with her stepmother and feeling neglected by her father, Sarah is left alone with an irritable Toby. Frustrated that her stepmother allowed Toby to have her cherished teddy bear, Lancelot, she cries out for someone to rescue her from this unbearable situation.
In a moment of anger, Sarah inadvertently summons the Goblin King, Jareth, played by David Bowie, who snatches Toby away and presents Sarah with a daunting choice: she can either accept her dreams or venture into the ever-shifting maze of the Labyrinth for 13 hours to rescue her brother. Determined to save Toby, Sarah embarks on her quest.
Upon entering the Labyrinth, she meets a peculiar dwarf named Hoggle, voiced by Brian Henson, who warns her about the dangers ahead but initially proves unhelpful. After finding herself trapped in an oubliette, Hoggle eventually decides to assist her, defying Jareth's orders to send her back. This act of rebellion angers Jareth, who punishes Sarah by stealing three hours of her precious time.
As Sarah navigates through various challenges, she encounters Ludo, a gentle giant who becomes her friend after she saves him from goblin tormentors. However, they soon become separated when Sarah stumbles upon the Firies—creatures eager to dismember her. Hoggle rescues her once again, but their bond remains precarious due to Jareth's threats.
In a pivotal moment, Hoggle is forced to give Sarah a magical peach that clouds her memory, transporting her to a surreal ballroom dance with the Goblin King. Upon awakening in a junkyard, Sarah realizes that her adventures were not just a dream, reigniting her determination to save Toby. With her friends at her side, they battle through hordes of goblins to reach the castle, where time is of the essence.
As Sarah ascends a treacherous staircase that defies logic, she finally spots Toby being manipulated by the Goblin King. With their paths entwined yet obstructed by the king's cunning, Sarah must act quickly. In a desperate leap, she jumps towards her brother, and despite the odds, her determination prevails.
In a dramatic climax, she confronts Jareth, reciting the victorious lines of her tale, ultimately banishing him and saving Toby. Returning home, Sarah finds her brother soundly asleep, a symbol of her triumphant journey. As she puts away tokens of her childhood fantasies, she sees the faces of her Labyrinth friends in the mirror, reassuring her that they will always be there when she needs them, reminding her of the magic she is capable of creating.
