In a forest in the late 18th century, Italian woodcarver Geppetto carves a heart into a pine tree to express his secret love for Leona. Years later, Geppetto finds the remains of the tree and fashions a marionette from its heartwood, naming him Pinocchio. Because the heart's magic brings him to life, the puppet immediately begins to wander the village, curious about the world and its possibilities.
Pinocchio soon crosses paths with a pair of thieves, Volpe and Felinet, who work for Lorenzini, a sinister theater director and puppet master. Lorenzini tries to buy Pinocchio, but Geppetto refuses. Pinocchio slips away and follows a group of local boys to the school, where the naughty Lampwick squares off with him, and the Schoolmaster quickly disciplines him after a lie that makes his nose grow. A misadventure sends Pinocchio to blame himself for damage at a local bakery, and Geppetto is arrested as a result, heightening Pinocchio's sense of responsibility and guilt.
Pinocchio flees home and finds a talking cricket, Pepe, who warns him that good behavior is the path to becoming a real boy. The next day, Pinocchio and Geppetto stand trial, and Lorenzini reappears with an offer to settle the debt if Pinocchio is handed over. The young puppet becomes the star of Lorenzini's productions, earning gold coins and even rescuing several of Geppetto's puppets from a fiery fate, though his fame coincides with a reckless incident that sets the theater ablaze and forces a hasty escape to the forest.
Seeking shelter, Pinocchio considers retreating to the very tree he was carved from, but a woodpecker drives him away. He then finds a church where he again encounters Volpe and Felinet, who charm him out of much of his pay. After a stern scolding from Pepe, Pinocchio learns of Terra Magica, a hidden fair where boys can indulge their desires. The water of Terra Magica turns those who drink it into donkeys, and the fair, it turns out, belongs to Lorenzini, who sells the transformed boys to circuses and farms. Pinocchio, who has only swallowed enough water to grow donkey ears, watches Lampwick lead the others into the cursed waters, while Lorenzini's dark enterprise looms over the scene.
The drama escalates as Pinocchio and the others flee the fair; Lorenzini is pushed into the water and transformed into a sea monster, forcing him to vanish into the ocean. The boys and donkeys escape to the shore, and Pinocchio reunites with Leona on the beach before setting out to find his father at sea. When a failed search turns into a new test of courage, Pinocchio and Pepe are swallowed by a sea monster, but they are eventually reunited with Geppetto inside the creature's stomach—an odd, humorous, and slightly unsettling reality they share as they try to find a way out, noting the peculiar scent inside that recalls “rotten chili peppers.”
Their escape proves perilous: the sea monster's throat is too narrow, and Pinocchio’s desperate lie to widen it forces his own nose to break in the process. After a harrowing struggle, the beast spits Geppetto and Pinocchio out, and the trio begins to regain their footing. On dry land, Pinocchio offers a heartfelt apology to Geppetto for not being a real boy yet, but Geppetto reassures him that he is real to him, no matter what.
Tears shed by Pinocchio fall upon the heart carving, rekindling the same magic that first brought him to life and transforming him into a real boy. In a final, sly twist, Pinocchio tricks Volpe and Felinet into drinking the cursed water and turns them into a real fox and real cat. Back at home, Geppetto and Leona are now married, and Pinocchio, with a sense of purpose, heads off to play with Lampwick, who—through many good deeds—has himself become a real boy again, closing the tale with a hopeful note about growth, responsibility, and the enduring ties of family.
