Long ago, near a small village by a stream surrounded by a large forest, honest Jonathan cuts firewood for the villagers. One day while chopping a large oak, the Forest Queen appears to Jonathan to plead with him to spare the tree, the oldest and fairest in the forest. Reluctantly, Jonathan agrees and in gratitude, the Queen offers him three wishes, cautioning him to consider carefully as the wishes will affect his wife Anna as well. When Jonathan expresses skepticism about the Queen’s offer, she vanishes. Frightened, Jonathan returns home with his burro Charlie. At home, Anna doubts Jonathan’s story until he wishes his dull cabbage meal would change into a hearty sausage. After the cabbage turns into a sausage, Anna wishes the sausage onto her husband’s nose for his silliness, but then frets that they have wasted two of their wishes. Jonathan spends the third wish regaining his real nose and he and Anna realize they have lost their wishes. On their way to bed, the couple pause at the empty, toy-filled nursery to lament their lack of children. Anna declares that she would love any child, even if it were no bigger than her thumb and Jonathan assures her there is still time for children. At the stroke of midnight, Jonathan and Anna are awakened by a knock at their front door. Investigating, Jonathan discovers a tiny boy, no bigger than his thumb, who declares that he is Jonathan and Anna’s son. Realizing that the kind Forest Queen has granted their deepest wish, Jonathan welcomes his tiny son and presents him to Anna who names him tom. After celebrating tom’s arrival, Anna puts him to bed in the nursery and sews him clothes. In the morning, tom awakens to a boisterous reception by the toys, who are grateful that tom’s presence has brought them to life. After partying with the toys, tom joins Jonathan on his daily trip to the forest and surprises his father with his ability to communicate with Charlie. In the forest, Jonathan warns tom to stay away from the dangerous swamp area filled with large, evil animals. A little later, when rogues Ivan and Tony come across father and son, they are taken with tom’s stature. Certain that the little fellow might be of invaluable help in their swindles, Ivan offers to buy tom. Incensed, Jonathan refuses. That afternoon, tom overhears musician Woody proudly telling the Forest Queen that he has been hired as a member of the village band. The Queen, who is in love with Woody, longs to be made mortal by his kiss, but Woody promises to woo her respectably. When Woody is unable to accept tom’s invitation to dinner, he promises to take the disappointed boy to the village fair that weekend. At the fair, the cobbler sells magic shoes that bewitch their wearers into endless dancing while music plays. Hoping to buy a pair for the Queen, Woody slips away from the band, but the cobbler informs him they are sold out. The cobbler offers a tiny pair to tom, who upon putting them on, excitedly dances away. Alarmed, Woody follows. When the band master notices Woody’s absence, he fires him, then speeds up the music. Barely avoiding the wildly stomping feet of the crowd, an exhausted tom manages to throw off his shoes, then to avoid falling off a step, grabs a rope attached to a balloon that sweeps him into air. Moments later, tom floats over the city hall tower where Ivan and Tony are trying to break in. Shooting the balloon down with a slingshot, Ivan “rescues” tom, who in gratitude asks if he might be of assistance. Ivan asks tom to climb through the grate into the treasury storage to retrieve money that Ivan swears he and Tony will use to save orphans. Tom agrees and is lowered into the treasury, from which he helps bring up the largest bag of gold coins. Although Tony wants to do away with tom, Ivan advises caution and, presenting tom with a gold coin, leaves him at the forest crossroads that lead to the swamp. Boldly walking into the swamp, tom is soon lost and falls into the murky water only to be rescued by the Forest Queen. Woody arrives moments later and, although relived to find tom safe, chastises him for being irresponsible. The Queen defends tom, insisting that Woody has been reckless. The two quarrel and when Woody declares he knows the Queen wants him to kiss her, the Queen vanishes in anger. Woody takes tom home, where he finds Jonathan angered over his late return. Upset at having distressed his parents, tom asks the leader of the toys, Con-fu-shon for advice, who then has the Yawning Man sing tom and the other toys to sleep. The following morning, soldiers arrive to question the family about the theft from the treasury. Anna invites the men in for breakfast, and one of the soldiers discovers a gold coin in one of Anna’s fresh baked loaves. Unknown to everyone, tom’s coin rolled into the bread dough the night before. The soldiers arrest Jonathan and Anna despite their protests. Tom, roused by the noise, gets help from the groggy toys to unlatch the door, but finds his parents gone. Determined to prove their innocence, tom resolves to find the real culprits. Tom goes to the forest to enlist Woody’s help and finds his friend lamenting the disappearance of the Queen, who listens while hidden nearby. Woody and tom track Ivan and Tony to an abandoned castle, where they are counting the treasury gold. After Ivan knocks Woody out, tom convinces the thieves that each one is cheating the other. They begin brawling with eachother, and when Woody revives, Tony knocks him out again. Meanwhile at the village, Jonathan and Anna are sentenced to a public whipping in the town square. After escaping from the castle, tom falls off a cliff into a water trough. Tony and Ivan ride away with the gold, and when Woody awakens, he follows them. Unknown to the thieves, tom is nestled in the horse’s ear and gives him commands to go to the village. Tom, Tony, Ivan and Woody arrive in the village square just as Jonathan and Anna are to receive their punishment. When the bag of gold coins falls from Ivan’s coat, the Kepellmeister orders them arrested and tom’s parents freed. Woody captures the crooked pair and is delighted when the Forest Queen materializes to praise him. Embracing her, Woody then kisses her and the two disappear only to materialize moments later with the Queen now a full-blooded mortal. The village celebrates the happy couple’s marriage and tom is thrilled to be paired with the pretty Thumbelina as a decoration on top of the wedding cake.