Kubo is a young, one-eyed boy who lives with his ill mother, Sariatu atop a mountain near a village. Kubo tells tales to the villagers about the warrior Hanzo, who is Kubo's missing father, magically manipulating origami using his shamisen. Kubo is warned by his mother not to stay out after dark, or else his grandfather, the Moon King, and Sariatu's Sisters will come and take his remaining eye.
One day, Kubo joins a ceremony where family members speak with their deceased loved ones, and attempts to speak with his father, but is angered when his father does not respond. Unknowingly staying out after sundown, Kubo is met by the Sisters, who attack him and destroy the village. Sariatu rescues Kubo and sends him away with her magic, telling him to find his father's armor, before being seemingly killed by the Sisters.
Kubo later awakens and is met by Monkey, his wooden monkey charm that was brought to life by his mother's magic. The two journey to find the pieces of Hanzo's armor, aided in their quest by Little Hanzo, one of Kubo's origami designed after his father. During their journey, they meet Beetle, a samurai warrior cursed into the form of a beetle who claims to be Hanzo's apprentice. Beetle joins them upon learning that Kubo is Hanzo's son. Shortly afterwards, they group manages to locate the "Sword Unbreakable" in an underground cave, fighting off a giant skeleton guardian in the process.
Kubo uses his magic to create a boat, and the group sets sail to find the second piece of Hanzo's armor, the "Breastplate Impenetrable", which is guarded by the Garden of Eyes, a monster that entrances its victims by revealing hidden secrets to them before eating them. Beetle and Kubo dive into the lake to retrieve the breastplate. During this, one of the Sisters attacks Monkey, injuring her before being killed. At the same time, Kubo recovers the breastplate, but is entranced by one of the eyes, which reveals to Kubo that Monkey is, in fact, his mother, reincarnated in physical form. He is saved by Beetle, and Kubo and Monkey restore the damaged boat.
Arriving on a nearby island, Monkey reveals that in the past, she and her Sisters were tasked by the Moon King to kill Hanzo, but she instead fell in love with him and gave birth to Kubo. Shortly afterwards, Kubo has a dream, where he meets a blind spirit named Raiden, who tells him to search Hanzo's abandoned fortress to find the final piece of the armor, the "Helmet Invulnerable". The group arrives at the fortress, only to be ambushed by the remaining Sister. During the attack, the Sister reveals that Beetle is Hanzo, having been cursed by the Moon King following his union with Sariatu. Beetle and Monkey are killed, and Kubo destroys the remaining Sister, breaking every string on his shamisen but one in the process.
A distraight Kubo returns to the village, learning that the helmet is the village bell. Adorning his father's armor, Kubo is confronted by Raiden, who is the Moon King. Raiden wants to take Kubo's other eye so he can become immortal and join the rest of his family. Kubo refuses, and an enraged Raiden transforms into the Moon Beast and battles Kubo. Despite wearing his father's armor, Kubo is overpowered and thrown into the village cemetery, where he is cornered by the Moon Beast. Kubo sheds his armor and re-strings his shamisen, using his magic to summon the spirits of the deceased villagers, telling the Moon Beast that his memories are the strongest magic of all. Kubo manages to defeat the Moon King, who becomes mortal and has no recollection of his past self. The villagers convince Raiden that he is a good man, allowing him to join the village.
In the end, Kubo is visited by the spirits of his parents at the village cemetery as he sets their lanterns afloat across a lake.