Ten-year-old Chihiro Ogino and her parents, Akio and Yūko, are traveling to their new home. Akio decides to take a shortcut and stops in front of a tunnel leading to what appears to be an abandoned amusement park, which Akio insists on exploring despite his daughter's protests. Upon finding a seemingly empty restaurant still stocked with food, Chihiro's parents immediately begin to eat. While exploring further, Chihiro reaches an enormous bathhouse and meets a boy named Haku, who warns her to return across the riverbed before sunset. However, Chihiro discovers her parents have turned into pigs, and she is unable to cross the now-flooded river.
Haku finds Chihiro and instructs her to ask for a job from the bathhouse's boiler-man, Kamaji, a yōkai commanding the susuwatari. Kamaji refuses and asks a worker named Lin to send Chihiro to Yubaba, the witch who runs the bathhouse. Yubaba tries frightening Chihiro away, but Chihiro persists and is eventually given a working contract. As Chihiro signs the contract with her name (千尋), Yubaba takes away the second kanji of her name, renaming her Sen (千). She soon realizes she can no longer remember her real name, and Haku explains that Yubaba controls people by taking their names; if she completely forgets hers like he once did, she will never be able to leave the spirit world.
Sen is frequently mocked by the other workers, except for Kamaji and Lin. While working, she invites a silent creature named No-Face (顔無し, Kaonashi) inside, believing him to be a customer. The spirit of a polluted river arrives as Sen’s first customer. After she cleans him, he gives her a magic emetic dumpling as a token of gratitude. Meanwhile, No-Face imitates the gold left behind by the river spirit and tempts a worker with it before swallowing him. He demands food from the bathhouse and begins giving away extensive amounts of gold to its workers.
Sen sees paper shikigami attacking a dragon and recognizes the dragon as Haku metamorphosed. When he crashes into Yubaba's penthouse with grievous injuries, Sen follows him upstairs. A shikigami that stowed away on her back shapeshifts into Yubaba's twin sister Zeniba, who turns Yubaba's son, Boh, into a mouse and creates a false copy of him. Zeniba tells Sen that Haku has stolen a magic golden seal from her that carries a deadly curse. Haku strikes the shikigami, causing Zeniba to vanish. He falls into the boiler room with Sen, where she feeds him part of the emetic dumpling, causing him to vomit up the seal and a slug, which Sen crushes with her foot.
Sen resolves to return the seal and apologize to Zeniba. She confronts an engorged No-Face and feeds him the rest of the dumpling. No-Face follows Sen out of the bathhouse, steadily regurgitating everything that he has eaten. Sen, No-Face, and Boh travel to see Zeniba with train tickets given to her by Kamaji. Meanwhile, Yubaba orders Sen's parents to be slaughtered, but Haku reveals Boh is missing and offers to retrieve him if Yubaba releases Sen and her parents. Yubaba agrees, but only if Sen can pass a final test.
Sen meets with Zeniba, who makes her a magic hairband and reveals that Yubaba used the slug to take control of Haku. Using his dragon form, Haku offers to fly them home. No-Face decides to stay behind with Zeniba and become her spinner, while Sen, Boh, and Haku leave for the bathhouse. Mid-flight, Sen recalls falling into the Kohaku River years ago and being washed safely ashore, correctly guessing Haku's real identity as the spirit of the Kohaku River (ニギハヤミ コハクヌシ, Nigihayami Kohakunushi). When they arrive at the bathhouse, Yubaba forces Sen to identify her parents among a group of pigs to leave. After she answers correctly that none of the pigs are her parents, her contract disappears, and she is given back her real name. Haku takes her to the now-dry riverbed and vows to meet her again. Chihiro crosses the riverbed to her restored parents, unable to remember anything after eating at the restaurant. Shortly before leaving for her new home, Chihiro looks back at the tunnel, her hairband from Zeniba still intact.
