In London during World War II, Wendy comforts her children with stories about her youthful adventures with Peter Pan in the fantastic world of Neverland. Young Danny loves the stories and believes that they're real, but his older sister, Jane, isn't so certain. Jane soon discovers her mother is indeed telling the truth when she's kidnapped by the evil Captain Hook, who is still trying to capture his nemesis, Peter Pan. Peter comes to the aid of young Jane, but as they do battle with Hook, he realizes it will take some work before Jane will fit in with the Lost Boys.