Not far from the harbor of the dank and fog-shrouded dystopian City of Lost Children, a terrifying scientist named Krank lives in a castle by the sea, prematurely aged due to a complete inability to sleep. On Krank's orders, his cyclops sidekicks kidnap the children and drag them into a gloomy laboratory where the villainous scientist turns their dreams into his own.
But because the children are terribly afraid of him, he only sees their nightmares. In search of his missing little brother, circus strongman Wan comes to the City. He is aided by a brave nine-year-old girl, Miette, and her brigade of little resistance fighters.