In 1977, Pete, a five-year-old boy, is on a road trip with his parents when their car flips off the road trying to avoid a deer. Pete’s parents are killed instantly, but Pete survives and is chased into the forest by a pack of wolves, only to be rescued by a dragon with green fur, yellow eyes, and huge wings. Pete names the dragon “Elliott” after his favorite book about a puppy of the same name with its family, and takes to him as a father figure.

Six years later, Pete, now 11, spots alumberjack crew chopping down trees near his home. Natalie, the daughter of the site foreman, spots and chases him. When Natalie accidentally falls from a tree, her screams attract her father, Jack, and his girlfriend, park ranger Grace Meacham. Pete tries to run away, but Gavin, Jack’s brother, accidentally knocks him unconscious. After realizing that Pete has vanished, Elliott stumbles around looking for him and ends up knocking over a tree near the lumber camp, leading Gavin to organize a hunting party to find him. Meanwhile, Pete wakes up to find himself in a local hospital, which he escapes in an effort to return to the forest. Before the police can catch him, Grace finds Pete and convinces him to come live with her by promising to take him to the forest the next day. After receiving a drawing of Elliott from him, Grace takes it to her father, who claims to have discovered the same dragon as a young man. He advises her to trust Pete, and to find Elliott.

Gavin and his men locate Elliott’s treehouse, but when they try to search it, Elliott reveals himself and scares them away. He then follows them back to town in an effort to find Pete. When he does, however, and finds Pete settling in with Grace’s family, he leaves.

The next day, Pete, Grace, Natalie, and Mr. Meacham travel to the forest to meet Elliott. A group of hunters led by Gavin surprise Elliott and tranquilize him, locking him up in Jack’s warehouse. Before the authorities can inspect Elliott, Pete and Natalie free him from his chains and escape on a lumber truck with Mr. Meacham.

Angered, Gavin sets up a roadblock at the bridge to stop them. A failed attempt by a still groggy Elliott to fly damages the truck’s brakes, causing the truck to plow through the barricade and come to a stop at the other side. Confused and frightened, Elliott perches himself atop the bridge and starts breathing fire at the police. The bridge begins to collapse under the intense heat, causing Grace and Jack’s truck to fall through. Elliott tries to prop them up, but the bridge suddenly gives way and they all fall into the ravine. At the last second, Elliott emerges with Grace and Jack on his back. With a military helicopter approaching, Pete decides to flee with Elliott back to the woods.

Elliott pleads with Pete to stay with him, but concludes that as long as they stay close together, Pete will always be in danger. He points out Pete’s book to try and convince him to go back to Grace and Jack. After a tearful hug, Elliott returns to the mountains, while Pete goes to live with Grace and Jack as his new family.

In the years that follow, Grace and Jack marry and adopt Pete as their son, Gavin moves on from the experience, and Elliott slowly fades from the town’s memory. Nevertheless, Pete and his family find him while on vacation, having found that Elliott has finally reunited with his fellow dragons.