Act 1 begins in the nursery of the Darling family home, which "is at the top of a rather depressed street in Bloomsbury." The lengthy stage direction tells us that the nursery has a window where Peter Pan used to fly to visit the three children, but that those days are over. Barrie writes, "That is what we call the Darling house, but you may dump it down anywhere you like, and if you think it was your house you are very probably right. It wanders about London looking for anybody in need of it, like the little house in the Never Land."
We are transported back to the days of the Darling family. The room has three beds, a large dog-kennel, and "the coverlets of the beds...are made out of Mrs. Darling's wedding-gown." The "nurse" is Nana, a Newfoundland dog who is sitting on the floor. As the cuckoo clock strikes six, Nana pops into action. Barrie writes, "All the characters, whether grown-ups or babes, must wear a child's outlook on life as their only important adornment. If they cannot help being funny they are begged to go away."
Nana the dog "turns down" the beds, and draws a bath for the youngest, Michael, who storms in the room and proclaims that he will not go to bed. Mrs. Darling comes into the room, and sees "a strange little face outside the window and a hand groping as if it wanted to come in." She asks the person outside who it is, but it disappears. She checks on Michael in the bath, then calls Wendy and John, her other children.
John tells his mother that he and Wendy are pretending to be Mr. and Mrs. Darling. Mr. Darling enters, a man described thus, "In the city where he sits on a stool all day, as fixed as a postage stamp, he is so like all the others on stools that you recognise him not by his face but by his stool, but at home the way to gratify him is to say that he has a distinct personality." He greets Mrs. Darling and complains that his tie will not tie around his neck. When Mrs. Darling manages to do it, the children erupt in elation.
Michael asks his mother when he was born, and she tells him he was born at two in the morning. "Oh, mother, I hope I didn't wake you," he says. Mr. and Mrs. Darling relish the fact that they have such sweet children. Nana comes in and gets hair all over Mr. Darling's pants. Mrs. Darling goes to brush Nana, as Mr. Darling bemoans, "I sometimes think, Mary, that it is a mistake to have a dog for a nurse."
Mrs. Darling tells her husband that she saw a face at the window when she came into the room that night and that she has seen it before. She tells a story that a week ago, a little boy had come in the room, and when he escaped, Nana slammed the window down and caught his shadow. She produces the rolled-up shadow from the drawer, which is described thusly: "...not more material than a puff of smoke, and if let go would probably float into the ceiling without discolouring it. Yet it has human shape."
Mrs. Darling is explaining to her husband that the boy was accompanied by a little ball of light, when they are interrupted by Nana with Michael's medicine. When Mr. Darling scolds Michael for being petulant about taking his medicine, Wendy goes to fetch Mr. Darling's medicine, which she brings back quickly. Mr. Darling and Michael tease each other about being afraid of their medicine. Mr. Darling does not take his, and plans instead to put it in Nana's bowl. When he does so, the children get upset and Mrs. Darling notices and scolds her husband.
Angered that his family has turned against him, Mr. Darling sends Nana to the yard for the night, saying, "Am I master in this house or is she?" As Nana barks outside, the children go to bed, sadly, but Mrs. Darling assures them that they will be protected by the night-lights, before going to tell the little maid, Liza, to check on the children through the night.
Just as the children fall asleep, the night-lights go out, and Peter Pan flies into the room, dressed "in autumn leaves and cobwebs." He calls to Tinker Bell, the ball of light that accompanies him, and looks for his shadow. In the process of searching for his shadow, he closes Tinker Bell in the drawer, When he finds his shadow, he tries to stick it on with water, and then soap from the bathroom. When it doesn't work, he begins to cry, waking Wendy.
She asks him what's wrong and they introduce themselves. When Wendy asks where he lives, he tells her, "Second to the right and then straight on till morning." Wendy asks him how his mother gets him letters and he tells her he doesn't have a mother. Sympathizing with him, Wendy goes to hug him, but he pulls back, telling her that no one should touch him. A stage direction reads, "He is never touched by any one in the play."
Wendy sews Peter's shadow onto him, and he is very excited to have it restored, crowing in delight. When Wendy feels unappreciated for her role in attaching it, Peter assures her, "one girl is worth more than twenty boys." She offers to give him a kiss and he holds out his hand.
Before anyone has spoken in the play, J.M. Barrie's stage directions weave an intricate and charming story of the context for the action. He writes about a house that is brimming with playfulness and childlike wonder, and even the prose with which he writes the directions reflects its thematic content as a play about childhood and imagination. Stage directions contain sentences like, "All the characters, whether grown-ups or babes, must wear a child's outlook on life as their only important adornment. If they cannot help being funny they are begged to go away." These directions read more like lines from a novel than as pragmatic instructions to a stage director, yet they provide a comprehensive and holistic background for the play, and draw the reader (or the director) into the world that Barrie has envisioned.
The Darling family is presented as an idyllic if multifarious unit. Mr. and Mrs. Darling are adoring parents, she the image of the loving mother, and he the long-suffering but doting breadwinner. They marvel at the sweetness of their children, Mr. Darling saying, "There is not their equal on earth, and they are ours, ours!" The Darlings are nearly perfect, and all have a spark of delight and imagination that stays true to Barrie's stage direction that the characters have a "child's outlook on life."
Nearly as soon as the Darling family is introduced, we are also introduced to the specter of Peter Pan. When Mrs. Darling first enters the bedroom, she sees the face of someone at the window, groping to be let in. In a private conversation with her husband, Mrs. Darling tells him that she has seen the "face of a little boy...trying to get in" several times, and that she even kept the boy's shadow, which Nana was able to snatch before he left the room. Before the children are even acquainted with the title character, Mr. and Mrs. Darling come to know of him.
The play is a fantasy from the start. It is not the sort of narrative where a completely realistic world is turned upside down by fantastical characters or forces. Indeed, even before Peter enters the stage we see that the logic of the Darling residence does not follow the rationality of realism. For one thing, the Darling children are looked after by a dog rather than a human nurse. Secondly, Mrs. Darling tells her husband that she was able to catch Peter Pan's shadow and keep it in a drawer. This is a vision of London that is already touched by some kind of magic, and that does not strictly follow straightforward codes of reason.
As soon as the Darling parents go out to dinner, Peter Pan appears in the room, a truly fantastical character, dressed in clothes made of "autumn leaves and cobwebs" and searching for his shadow. He is a charming if naive orphan boy who can fly, and he immediately strikes up a rapport with Wendy, who helps him sew his shadow back on. Wendy is a character who is already anxious to be a responsible adult, and she acts as a sort of mother figure for Peter upon their first meeting.