As the years pass since the whimsical adventures of Peter Pan, Wendy Darling, now a mature matriarch, has settled down with her husband Edward, a soldier, and together they have two children, Jane and Danny. The pressures of World War II soon send Edward off to battle, leaving Wendy to manage their young ones. In this tumultuous environment, Jane, having matured into a serious young lady, has turned her back on the enchanting world of Neverland, in stark contrast to her imaginative younger brother, Danny. With Danny's fourth birthday approaching, Wendy learns that the family will be relocated, igniting a fierce disagreement with Jane, who is adamantly against leaving and wishes to stay behind.
Simultaneously, the infamous Captain Hook, Peter Pan's nemesis, along with his doughty crew of pirates, suddenly arrive aboard their magical ship, mistaking Jane for Wendy and seizing her to whisk her away to Neverland. Their nefarious plot? To offer Jane as a meal to a monstrous octopus, thus ensnaring Peter Pan in a deadly trap. Yet, the Boy Who Refuses to Grow Up swiftly intervenes, rescuing Jane from the villainous Hook and foiling his wicked plans. Though Hook narrowly escapes the octopus’s grip, he quickly regroups with his crew.
Once it dawns on Peter that Jane is indeed Wendy's daughter, he takes her under his care, inviting her to embrace the role of mother to the Lost Boys, reminiscent of her past with them. Despite the allure of Neverland, Jane is steadfast in her desire to return to the world of mortals and attempts to escape the island on a makeshift raft, though her plan fails disastrously. Peter then shares a crucial piece of wisdom: that the only way to return home is to learn the skill of flying. The following day, attempts by the Lost Boys to guide Jane in the art of flight end up frustrating her even more.
As Jane grows increasingly impatient with their playful maneuvers, she openly dismisses her belief in Neverland and its enchanting inhabitants, including Tinker Bell. This denial resonates deeply; Tinker Bell's light begins to dim in response, casting a shadow over the once vibrant island. Hearing Jane’s heartfelt wish to return home, Hook devises a scheme to manipulate her feelings. That evening, he proposes a plan to safely return her home, but only if she retrieves the treasure that Peter and the Lost Boys have taken. To solidify their agreement, he gifts her a whistle, directing her to blow it when she locates the treasure.
Taking part in a game of "treasure hunt" with Peter and the Lost Boys, Jane feigns interest as they attempt to show her the joy of whimsical living, hoping to inspire belief in the magic of fairy life to save Tinker Bell. While on her search, Jane eventually discovers the treasure but finds herself at a crossroads; she has a change of heart and chooses to reject Hook’s allure, instead opting to unite with Peter and the boys, who welcome her with open arms. The Lost Boys affectionately bestow her with the title of “Lost Girl,” briefly suggesting that Jane has found her true place within Neverland.
However, the tides of fate turn once more. A simple error by Tootles—blowing the whistle gifted by Hook—alerts the pirates to the whereabouts of the boys, culminating in the capture of Peter and his companions. As Jane endeavors to make amends with Peter, he is rightfully incensed by her prior deception, and she comes to understand that her skepticism regarding fairies has been subtly draining Tinker Bell’s vital light. Distressed by her actions, Jane rushes back to the hideout only to witness Tinker Bell’s frail body, a sight that utterly devastates her.
In this heart-wrenching moment, Jane experiences a rebirth of faith in the world of fairies, leading to a flicker of hope amid despair. As Peter readies himself to confront a perilous fate on the plank, Jane unexpectedly gains an ally in Tinker Bell, who shares her secrets with Jane. With this newfound understanding, Jane discovers how to break the bounds of gravity, soaring through the the skies as if enchanted. Meanwhile, Hook's dastardly plans unravel as Peter employs the anchor to send the pirate ship off to Davy Jones' locker, pursued by an irate octopus eager to greet the pirates.
Where the dust finally settles, Peter and Jane manage to return to reality, where they joyously reunite with Wendy and Danny, while Edward comes back home to embrace his family, leaving behind the extraordinary wonders of Neverland.
