The film begins with Jiminy Cricket sitting in a library, melodiously singing "When You Wish Upon A Star." Addressing the audience directly, he shares his belief in the power of wishes. Opening a storybook titled "Pinocchio," he recounts the tale of how he came into the home of the talented woodcarver Geppetto and his beloved pets, Figaro the cat and Cleo the fish. Geppetto has crafted a charming wooden puppet named Pinocchio, whom he cherishes deeply ("Little Wooden Puppet"). Before settling down for the night, Geppetto makes a heartfelt wish upon the evening star, dreaming that Pinocchio could transform into a real boy.
As Geppetto sleeps, the magical Blue Fairy appears and fulfills this wish partially; Pinocchio gains life but must prove himself worthy of being a real boy. However, being naive and impressionable, he needs guidance. Therefore, the Blue Fairy appoints Jiminy Cricket as his "conscience," informing him that whenever he needs help, all he must do is whistle ("Give a Little Whistle").
The following morning, Geppetto sends his son off to school. However, Jiminy Cricket is still slumbering! Thus, Pinocchio, filled with good intentions, walks to school but soon gets side-tracked by the cunning John Worthington Foulfellow and his bumbling friend Gideon the cat. Recognizing the unique qualities of the wooden boy, these smooth-talking villains scheme to sell him to the traveling marionette master Stromboli, who is in town. They convince Pinocchio that this opportunity will make him an actor, leading him to the glitzy show managed by Stromboli ("Hi-Diddle-Dee-Dee"). Despite Jiminy Cricket’s attempts to intervene and prevent Pinocchio from being ensnared, he arrives too late. Enthralled by his newfound fame, Pinocchio dazzles audiences in Stromboli’s show, dancing alongside other puppets in a European-themed musical splendidness ("I've Got No Strings"). Feeling a sense of failure, Jiminy wanders off into the night.
Desperate to return to Geppetto, Pinocchio finds himself imprisoned in a bird cage by Stromboli, who wishes to exploit the puppet's talent. Alone in the darkness of Stromboli’s damp caravan, Pinocchio calls out for Jiminy Cricket. His loyal companion finds him, but unfortunately, he lacks the strength to unlock the cage. Just then, the Blue Fairy reappears. Hesitant to admit his misdeeds, Pinocchio fabricates excuses, resulting in his nose growing longer with each lie. The Blue Fairy forgives him and releases him from the cage, but she warns him that continued misbehavior will prevent him from becoming human. (She magically returns his nose to its rightful size.)
Once freed, Pinocchio and Jiminy Cricket manage to escape Stromboli and set off toward home. However, fate intervenes, and they become separated once more. Pinocchio crosses paths again with Honest John and Gideon, who have been hired by a nefarious coachman to round up boys for the chaotic Pleasure Island amusement park. Jiminy, realizing he is too late once again, follows Pinocchio to Pleasure Island—a haven where boys indulge in unruly behavior and pamper themselves with beer and cigars. Yet there is a sinister secret; as they continue to behave like fools, they are transformed into donkeys, which the coachman sells, condemning them to a life of degradation in circuses and mines. Pinocchio begins to morph into a donkey, sprouting long ears and a tail, but just before the transformation is complete, he manages to escape the dreadful amusement park and rushes home. To his dismay, he discovers that his father is missing.
A dove arrives carrying a note from the Blue Fairy, revealing that Geppetto has set sail in search of his lost son and has been swallowed by the fearsome whale Monstro. Determined to rescue his father, Pinocchio, along with his loyal yet hesitant conscience, ventures into the depths of the sea. They discover Geppetto trapped within the belly of the whale and hatch a plan to escape by igniting a fire in the monstrous creature’s belly, causing Monstro to sneeze them out. In a furious act of revenge, the whale destroys Geppetto’s raft. Without hesitation, Pinocchio selflessly saves Geppetto from drowning, sacrificing his own life in the process. Finally, through this act of bravery and love, Geppetto's wish is fulfilled. Pinocchio’s noble sacrifice proves to the Blue Fairy that he is indeed worthy, and he is resurrected—no longer as a puppet but as a real, living boy.
As Geppetto, Pinocchio, Figaro, and Cleo celebrate their reunion, Jiminy Cricket steps outside to gaze at the wishing star. Having demonstrated his worthiness as a good conscience, he is awarded a shiny gold badge.
