Bastian Bux, a young boy who loves to read, is still struggling to cope with the loss of his mother. While reading a book in his school's attic, he is once again transported to the magical world of Fantasia, where he saves the childlike Empress from a deadly disease using his imagination.
However, their victory is short-lived, as the wicked sorceress Xayide arrives in Fantasia and starts to manipulate the Empress into following her commands. Xayide, who desires total control over Fantasia, plans to use a giant tower to reach the Human world and enslave humanity.
To stop her, Bastian and Atreyu must journey across the treacherous Sea of Possibilities to find the mysterious Wandering Mountain, where a powerful cure for Xayide's brainwashing magic can be found. Along the way, they encounter new creatures like The Nasties and The Head That Wears a Crown.
As they progress, Bastian realizes that his imagination and his ability to create new stories can help stop Xayide and protect Fantasia from destruction. In the end, Bastian faces his fears and uses the power of his imagination to defeat Xayide and save Fantasia once again.