The film begins as a teenage girl named Sarah baby-sits her younger brother Toby. A romantic girl who indulges herself in fantasies and daydreams, Sarah dislikes always having to be responsible for her kid brother.

In a moment of annoyance, she wishes the Goblin King would steal him away forever. She is horrified when her terrible wish actually comes true, and she plunges into the labyrinth in order to save poor Toby.

Jareth, the Goblin King, watches Sarah with great interest as she navigates her way through the treacherous, complicated maze. She is assisted in her quest by many strange characters, including the gruff dwarf Hoggle, the miniature but brave Sir Didymus and the gentle giant Ludo.

Sarah's adventures in the labyrinth cause her to become a wiser and more compassionate person, as she matures from a self-indulgent child to a young, intelligent woman.