In a small fishing village, a young boy named Pete escapes from his abusive adoptive family, the Gogans, and finds solace in the company of his kind-hearted dragon, Elliott. With the ability to become invisible, Elliott protects Pete as they roam the New England countryside, looking for a place to call home. As they arrive in the quaint village of Passamaquoddy, Elliott's mischievous behavior inadvertently causes chaos, making the townsfolk skeptical and wary. Pete soon crosses paths with Nora, a lighthouse keeper who takes pity on the homeless boy, and her father, Lampie, who initially struggles to believe in Elliott’s existence.

As Pete settles into life with Nora and Lampie, he grapples with finding acceptance in the town. Meanwhile, the conniving Dr. Terminus arrives with his assistant Hoagy, seeking to exploit Elliott for his own gain. The Gogans also continue their relentless pursuit to reclaim Pete. The boy and his dragon face numerous challenges as they try to stay hidden from those who threaten their peace, finding courage and friendship along the way. A significant event puts relationships and trust to the test, leading Pete to make crucial decisions about his future and the bond he shares with his magical dragon.