Sixteen-year-old Jacob Portman grew up listening to his grandfather tell him stories of living on an island in a children's home where each child had a supernatural ability of some sort. As he got older, he began to dismiss these as fiction, but still retained his close relationship with his grandfather, who seemed to be getting more senile by the day as he talked of monsters waiting to attack him. One day Grandpa Portman is killed by a mysterious creature in the woods, and Jacob sets out on a mission to uncover the meaning behind his cryptic last words and learn at last about his grandfather's veiled past.
His search takes him and his father to Cairholm, a sparsely populated island in Wales where the children's home that his grandfather grew up in is located. While his father studies the bird species on the island, Jacob hikes through the woods and bog to the house, but finds that it is completely dilapidated and abandoned. The locals tell him stories of the German bombs that wiped the place out and killed all the inhabitants on September 3, 1940, leaving Jacob's grandfather as the only survivor. To Jacob, this does not make sense because he found a letter from Headmistress Alma Peregrine to his grandfather dated only fifteen years before. He wonders if Miss Peregrine had not died after all, or if someone took on her identity in the letter.
Determined to find some final shred of the truth, Jacob goes back to the abandoned house one last time and finds a trunk of old photographs identical to the ones his grandfather used to show him, of children doing strange things like levitating or holding fire. As he looks at the photos, he notices that there are six children watching him, asking if he is Abe, his grandfather's name. He chases them through an old stone cairn into a world that is almost identical to the one that he just left but different in one major way: it is September 3, 1940, and he has somehow traveled back in time.
Two of the children he was chasing capture him—Millard, an invisible boy, and Emma, a girl who can make fire in her hands. They take him back to the children's home, which is no longer abandoned but crawling with children who have all sorts of "peculiarities," or supernatural traits and abilities. They introduce him to Miss Peregrine, the matriarch who watches over the children and runs the house. After deducing that Jacob is indeed Abe's grandson, she explains as much as she can. They are all peculiar humans, or syndrigasti, born with these traits that distinguish them from common folk. She is a special kind of syndrigast called an ymbryne, who can turn into a bird and has the ability to manipulate time. She has set up a time loop for her peculiar children to live in - the day September 3, 1940 repeats indefinitely. The loop resets and begins again just as the German bombs are about to strike the island. Many such time loops exist around the world, all presided over by ymbrynes.
Jacob feels at home in the time loop right away and returns daily, getting back and forth from his own time through the old cairn. He develops a relationship with Emma, but it is complicated by the fact that Emma was his grandfather's sweetheart back before Abe left the loop for good. As time goes on, Miss Peregrine and the children at last tell Jacob the grim truth about their kind: they are constantly hunted by hollowgasts, which are the monstrous remains of peculiar folk who once tried to use time loops to make themselves immortal. Hollowgasts are served by wights, which are hollows that have eaten enough peculiar people to revert back to some semblance of their human form.
One day Miss Avocet, an ymbryne friend of Miss Peregrine, shows up and warns them that the hollows and wights have set out to kidnap ymbrynes, and she herself only just escaped. When Jacob tells Miss Peregrine about a strange new birdwatcher on the island, she worries that a wight may have followed Jacob to the island. She also tells Jacob at last that he himself is peculiar: he is able to see hollows, just like his grandfather, and this in itself is a rare ability because no one else can.
The danger escalates when, in Jacob's own time, they find the town's museum curator murdered, and Miss Peregrine tells Jacob that he must make a choice: stay in the loop with them, or leave and never return, for fear of jeopardizing the peculiar children's safety by leading a wight there. Instead, he sneaks out with Emma and some of the other children to try and stop the hollow before it gets to them. They use one of the children's abilities to raise the curator from the dead and ask what killed him. As soon as this is done, the wight who has been tracking them appears, and reveals that he has been taking on different personas in Jacob's life for years and years to watch him: most recently, his trusted psychiatrist, Dr. Golan.
The wight disappears and the children fight his hollow companion. Jacob successfully kills the hollow, but they realize that the wight has gone into the loop and kidnapped Miss Peregrine and Miss Avocet in their bird forms. The children pursue the wight and learn that he has plans to restart the immortality experiment, which is why they are kidnapping ymbrynes. Jacob shoots the wight with his own gun, but not before he throws the cage containing the birds into the ocean, which is taken by wights who have commandeered a German U-Boat. The children manage to rescue Miss Peregrine, but Miss Avocet is lost.
Due to the damage the wight did to her, Miss Peregrine is stuck in her bird form and the loop has not reset. The house has been bombed and it has progressed to September 4, 1940 for the first time. Jacob and the other children decide they must go in search of the wights in order to stop the terrible things that would happen to the world due to their immortality experiment. Jacob returns to his own time once more to tell his father that he is leaving, and brings his peculiar friends as proof that everything Grandpa Portman used to tell him was the truth. Then, he and the children sail away from the island, using a map of all existing time loops as their only guide.