Wendy, John and Michael Darling a three siblings living in a nursery. The three have a steadfast belief in Peter Pan, a boy who lives on the island Never Land, which allows the inhabitants to never grow old. Their father, George, becomes irritated by their belief and informs Wendy of his intentions of giving her a separate room for her. That night, Peter Pan and his fairy friend, Tinker Bell, arrive looking for Pan's shadow and meet the three siblings. Wendy sews Peter's shadow back on him and Peter uses pixie dust to enable the siblings to fly. The five then journey from the nursery and to the land of Never Land.
Shortly upon arriving, the five are attacked by Peter's arch-nemesis, Captain Hook, and his band of pirates. Captain Hook, seeking revenge against Peter for the latter having dismembered his hand and feeding it to a crocodile, attempts to shoot him down with cannon balls. Tinker Bell flees the scene and meets up with the Lost Boys, tricking them into attempting to kill Wendy, who Tinker Bell has become envious of. Peter rescues Wendy, however, and banishes Tinker Bell for her treachery. John, Michael and the Lost Boys are later captured by a tribe of Indians, who believe them responsible for the kidnapping of chief's daughter, Tiger Lily.
While Peter and Wendy visit a group of mermaids, they discover Captain Hook to have been responsible for Tiger Lily's abduction. Peter and Wendy rescue Tiger Lily and defeat Hook, who is chased off by the crocodile. However, Hook's assistant Mr. Smee captures Tinker Bell and Hook convinces her to reveal the location of Peter's hideout. Peter has an argument with the Darlings after they reveal their intentions of returning home, and the Darlings and Lost Boys are captured by the pirates. Captain Hook leaves a time bomb wrapped in a present in Peter's hideout to kill him. However, Tinker Bell removes the bomb from Peter just as it explodes, severely injuring her.
Captain Hook attempts to convince the Darlings and Lost Boys to join his pirate crew, but they refuse. Peter Pan and a healed Tinker Bell arrive in time to rescue the children while Peter battles Hook. The pirates and Smee flee in a small boat while Captain Hook is subdued by Peter. Hook falls off the ship and is chased out of Never Land by the crocodile, along with the pirates. Peter Pan commandeers Captain Hook's ship and flies it back to London, where the Darlings return to the nursery and reunite with their parents. Peter Pan and the Lost Boys then return to Never Land.
- Bobby Driscoll as Peter Pan, the leader of the Lost Boys.
- Kathryn Beaumont as Wendy Darling, the oldest of the Darlings.
- Hans Conried as Captain Hook, a pirate captain/George Darling, the Darlings father.
- Bill Thompson as Mr. Smee, Captain Hook's first mate.
- Heather Angel as Mary Darling, George's wife.
- Paul Collins as John Darling, the middle of the Darlings.
- Tommy Luske as Michael Darling, the youngest of the Darlings.
- Candy Candido as Indian Chief, the leader of the Indian tribe.