After singing the film’s signature song “When You Wish upon a Star”, Jiminy Cricket explains to the audience that he is going to tell a story of a wish coming true. In flashback, he moves into the workshop of the woodworker Geppetto to warm himself from the cold. Jiminy watches as Geppetto finishes work on a wooden marionette whom he names Pinocchio. Before falling asleep, Geppetto makes a wish on a star that Pinocchio could be a real boy. During the night, the star, in the form of a Blue Fairy, visits the workshop to grant Geppetto’s wish. She makes Pinocchio come alive, while remaining still a puppet. The fairy tells Pinocchio that if he wants to become a real boy of flesh and blood he must prove himself to be brave, truthful and unselfish and able to tell right from wrong by listening to his conscience. Pinocchio does not understand what a conscience is, and Jiminy appears to explain it to him. The Blue Fairy asks if Jiminy would serve as Pinocchio’s conscience, a task he accepts.

Geppetto discovers that his wish has come true, and is filled with joy. The next day, he sends Pinocchio on his first day of school. However, the naive Pinocchio is led astray by the conniving con artists Honest John and Gideon, who convince him to join Stromboli’s puppet show instead. Pinocchio becomes Stromboli’s star attraction as a magic string-less marionette, but when Pinocchio wants to go home for the night (though promising to come back in the morning), Stromboli locks Pinocchio in a birdcage to prevent him from leaving. During the night, the Blue Fairy comes to ask why Pinocchio disobeyed Geppetto. Despite Jiminy’s urgings, Pinocchio tells an overblown story to hide his shame, but with each lie his nose grows and grows until it is like the branch of a tree. The Blue Fairy explains that “a lie will keep growing and growing, until it’s as plain as the nose on your face.” Pinocchio vows to do better from now on and the Blue Fairy changes his nose back to normal and sets him free, warning that this will be the last time she helps him.

Unfortunately, on his way back to Geppetto’s house, Pinocchio is once again led astray by Honest John and Gideon, who convince him that he is sick, and the only cure is to go to Pleasure Island. On his way he befriends Lampwick, a misbehaved and destructive boy. Soon Pinocchio and the other boys begin to enjoy gambling, smoking, getting drunk and destroying Pleasure Island, much to Jiminy’s dismay. Then Jiminy discovers the island harbours a terrible curse which turns boys who “make jackasses of themselves” into real donkeys, who are then sold to work in the salt minesand circuses as part of an evil racket run by The Coachman. Lampwick is soon transformed into a donkey, but Pinocchio manages to escape with only a donkey’s ears and tail.

Upon returning home, they find the workshop empty and soon learn (from a letter by the Blue Fairy) that Geppetto, while venturing out to sea to rescue Pinocchio from Pleasure Island, had been swallowed, along with his cat, Figaro, and his fish, Cleo, by a giant whale named Monstro. Determined to rescue his father, Pinocchio jumps into the bottom of the ocean, with Jiminy accompanying him. However, Pinocchio is soon found and eaten by Monstro, where he is reunited with Geppetto and his pets inside the whale. Pinocchio devises an escape plan by burning wood in order to make Monstro sneeze. The plan works, but the enraged whale gives chase. Eventually, Pinocchio succeeds in getting Geppetto to safety in a cave under a cliff before Monstro rams into it. After Monstro’s defeat, Jiminy discovers that Pinocchio is dead. At their home, the group mourn for Pinocchio, but from afar, the Blue Fairy decides Pinocchio has proven himself, and he is reborn as a real human boy, much to the joy of his family. When Jiminy steps outside to thank the Fairy, she decides he has done well, and gives him a gold badge that certifies him as an official conscience.