During the Christmas season, high-powered corporate lawyer Peter Banning, his wife, Moira, and twelve-year-old son Jack watch a school production of J. M. Barrie’s play, Peter Pan, in which his daughter, Maggie, appears as “Wendy.” During the performance, Banning answers a call on his cellular telephone from a co-worker asking him to attend an impromptu morning meeting. Peter protests, as he is set to leave for London, England, with his family, where an orphans’ hospital will be dedicating a new wing to his “Granny,” Wendy Angela Darling. He finally relents, but Jack reminds his dad that he has already promised to attend his final “Santa Series” baseball game. The next morning, Peter sends an aide to videotape Jack’s game while his employees joke with him about his fear of flying. When Jack realizes his father is not in the stands, he strikes out, causing his team to lose. Once Peter finally arrives, Jack’s game is long over. Onboard the airplane, the flight runs into turbulence above the Atlantic Ocean, and Peter is less than pleased when Maggie shows him a drawing Jack made of their plane crashing, with all in the family except Peter parachuting to safety. At his wife’s urging, Peter talks to Jack and promises to attend six of his games next season. In London, the Bannings arrive at Granny Wendy’s home. Because it has been ten years since Peter’s last visit, she reminds him they all must observe the only house rule: “No growing up.” That night, Peter returns to the bedroom where he slept as a boy, but his reverie is broken by another call from his co-worker. When the children continue to pester him during the call, Peter loses his temper and demands Moira take them out of the room. When the phone rings again, she rips it from his grasp and throws it out the window into the snow, admonishing her husband for missing the brief time in life when their children will actually want them to be around. Later, Peter and Moira escort Granny Wendy to the dedication banquet, leaving the children at home. Addressing the attendees in a heartfelt speech, Peter reflects on his upbringing with Granny Wendy, who cared for him before he found adoptive parents. When they return home, the Bannings discover Maggie and Jack have been kidnapped and taken to the mythical world of Neverland by the evil Captain Hook. Pouring himself a stiff drink, Peter returns to his childhood nursery and goes out onto the balcony. Suddenly, a fairy sprite named Tinkerbell flies inside and urges Peter to follow her. To her disappointment, however, Peter insists he has grown up and does not believe in fairies. Having no other choice, Tinkerbell knocks him unconscious, wraps him in a blanket, and carries him to Neverland herself. Shortly after arriving on the magical island, Peter disguises himself as a pirate and sneaks aboard Captain Hook’s ship just as Hook’s first mate, Smee, introduces their nefarious, one-handed leader to the crew. The captain announces that he has the children in his possession, and intends to kill Peter, his former adversary, when he comes to their rescue. When Jack and Maggie are hauled onto the deck, Peter reveals his identity and clumsily fails to save them. Pirates drag Peter to the presence of Captain Hook, but he has trouble convincing the captain that he is Hook’s onetime opponent, Peter Pan. Hook has the children raised high above the deck in a rope net and promises to release them when Peter flies up and touches them. Because Peter does not know how to fly, he climbs the mast in attempt to fulfill his part of the bargain. As he crawls out on a yardarm to reach his children, he slips and nearly falls. Hook decides to call off his war with Pan and do away with Peter as well as the children, but Tinkerbell intervenes, promising to get Peter into shape within a week. She taunts Hook for appearing cowardly, and he quickly agrees to the deal. To train, Peter arrives at the treehouse occupied by Tinkerbell and his former friends, the rambunctious Lost Boys, who ridicule him for growing old and gaining weight. Meanwhile, Smee convinces Hook to act in such a way that Peter’s children will come to hate their father and love the pirate, thus forcing Peter to fight to regain their affection. The Lost Boys, in turn, tease Peter until he remembers how to use his imagination. Rufio, the boys’ current leader, becomes jealous of Peter’s newfound popularity and throws a coconut at Peter’s head. Regaining his youthful reflexes, Peter grabs a sword and slices the coconut in half before it strikes him. Eventually, he begins to remember his past life as Peter Pan. That night, the soft ticking of Jack’s pocket watch triggers traumatic memories for Hook as he continues to live in fear of the crocodile that chewed off his hand after he forced it to swallow an alarm clock. Just before he is about to gut Jack with his hook, Smee reminds the captain that he killed the crocodile years before. Hook takes Jack to a clock shop where all the merchandise has already been broken. When one clock starts to tick, Smee and Hook encourage Jack to smash the clocks himself, for all the times his father broke his promises. To win the boy’s affection, Hook arranges a baseball game and cheers Jack when he scores a home run. Peter watches from behind the stands, and becomes upset that his son has developed an attachment to the evil pirate. Back at the treehouse, Peter determines he needs to relearn how to fly. Although initially unsuccessful, Jack’s home run ball plummets back down to Earth and strikes Peter on the head. When he revives, he sees the reflection of the boy he once was — Peter Pan — looking back at him in a shallow pond. Snatching the baseball from the water, Peter sees Pan’s shadow, which leads him to the underground house he built with the Lost Boys for Wendy Darling. Memories suddenly flood back to Peter: After running away as an orphan, he was rescued by Tinkerbell, who brought him to Neverland, where children remain the same age forever. Eventually, he grew to miss his mother, but returned home and discovered he had been long forgotten. He visited other homes and got to know Wendy and her brothers, John and Michael. After their frequent adventures, he returned every year until Wendy became old and forgot how to fly. One night, elderly Wendy introduced Peter to her own sleeping granddaughter, Moira. Peter gave her a kiss, which began his journey to adulthood. Ultimately, Peter decided to stay with Wendy and grow up because he wanted to be a father, and the happy thought that he now has children of his own lifts him off the ground. The power of flight restored, Peter returns to Hook’s ship. Jack does not initially recognize his father, but as the battle begins, he realizes how much Peter truly loves him. With Peter in danger of losing the fight, the Lost Boys come to his aid. As Rufio prepares to duel, Captain Hook knocks the boy’s sword from his hand and stabs him through the heart. With his dying breath, Rufio wishes he had a father like Peter. Overhearing the boy’s wish, Jack has a change of heart and tells Peter he wants to go home. Peter turns his back on his adversary to retrieve Jack and Maggie, but Hook promises to track them down wherever they go. Peter returns to fight. As he hones his hook on a sharpening stone, the pirate captain berates Peter, telling him that his adventure is only a dream, and when he wakes up he will be the same tired, middle-aged businessman he was before. The Lost Boys believe in Peter, however, and Peter takes the pirate’s sword. As he returns the weapon, Hook slices Peter’s wrist with the sharpened hook. Peter promises to end the fight just as the Lost Boys arrive with several ticking and ringing clocks. In Hook’s panic, Peter knocks off the Pirate’s hat and wig, revealing him to be an old, balding man. He threatens to kill Hook, but instead decides to exile him from Neverland. As the Bannings walk away, Hook attempts to revive the fight. Tinkerbell distracts him, and he embeds his infernal appendage into a giant crocodile statue in the town square. The statue topples over, trapping the captain between its jaws. Peter celebrates with the Lost Boys, but realizes he must return to the real world. Peter, Jack, and Maggie fly off with Tinkerbell leading the way. Back in London, Moira is asleep in her chair in the nursery keeping vigil. The children return, and when she awakens, they have been tucked safely into their beds. Peter lands in the snowy lawn next to his discarded cell phone and climbs the drainpipe to the nursery balcony. A changed man, he tosses his phone out the window to concentrate on his family. Granny Wendy greets him with "Hello, boy," as she did so many years ago, and they share a tearful embrace.