In the animated fairy tale kingdom of Andalasia, the evil Queen Narissa schemes to protect her claim to the throne, which she will lose once her stepson, Prince Edward, finds his true love and marries her. She enlists her loyal henchman Nathaniel to keep Edward distracted. Giselle, a young woman, dreams of meeting a prince and experiencing a ”happy ever after”. Edward hears Giselle singing and sets off to find her. Nathaniel sets free a captured troll to kill Giselle, but Edward rescues her in time. When they meet, they instantly fall in love and plan to get married the following day.
Narissa, disguised as an old hag, intercepts Giselle on her way to the wedding and pushes her into a well, and she is magically transformed into a 3D live version of herself and transported to a manhole in New York City’s Times Square. Giselle quickly becomes lost. Meanwhile, Robert, a divorce lawyer, prepares to propose to his longtime girlfriend Nancy, much to the dismay of his daughter Morgan. Robert and Morgan encounter Giselle on their way home, and Robert begrudgingly allows Giselle to stay the night at their apartment at the insistence of Morgan, who instantly trusts Giselle.
Pip, Giselle’s best chipmunk friend from Andalasia, had witnessed Giselle’s exile and alerted Edward thereafter, and both embark on a rescue mission to the city, where they too are turned into 3D versions, but Pip is instead in the form of a real chipmunk – therefore losing the ability to speak. Narissa sends Nathaniel to follow and impede Edward. In a restaurant, Narissa appears to Nathaniel in a soup pot and gives him three poisoned apples to murder Giselle. Pip eavesdrops but is unable to communicate with Edward, as animals cannot speak outside of Andalasia. Nathaniel keeps Pip silenced by imprisoning him in various containers. Meanwhile, after Giselle summons vermin to clean Robert’s apartment, Nancy arrives to take Morgan to school. She meets Giselle and then angrily leaves assuming Robert was unfaithful. Robert is initially upset but spends the day with Giselle, knowing she is vulnerable in the city. Giselle questions Robert about his relationship with Nancy and helps the pair reconcile by sending Nancy an invitation to the ”King and Queen’s Costume Ball” at the Woolworth Building. She also begins to win Robert over with her sunny disposition and optimism, even inadvertently helping one of his clients reconcile with his wife.
After searching throughout the city, Edward finally locates Giselle at Robert’s apartment. While Edward is eager to take Giselle home to Andalasia and marry, she insists that they should first go on a date to get to know each other, still conflicted about her feelings. Giselle promises to return to Andalasia after ending their date at the ball, which Robert and Nancy also attend. Narissa, who has been spying from Andalasia, decides to follow and kill Giselle herself after Nathaniel failed to poison her twice. Robert and Giselle share a dance with each other, with both Edward and Nancy noticing their obvious attraction to each other. Giselle and Edward then prepare to leave, but Giselle feels sorrow at leaving Robert behind. Narissa appears as the old hag and offers the last poisoned apple to Giselle, promising ”sweet dreams and happy endings.” Giselle takes a bite and falls to the floor unconscious.
Narissa attempts to escape with Giselle’s body but is stopped by Edward. Nathaniel, realizing Narissa was using him and never loved him, reveals her plot. Robert realizes that true love’s kiss (something Giselle often discussed) is the only force powerful enough to break the apple’s spell. After Edward’s kiss fails to wake Giselle, he prompts Robert to do so instead. Robert kisses her just as the clock strikes twelve, Giselle awakens and the whole crowd cheers, with everyone else believing that the situation is a staged event for the ball. Narissa, however, furiously transforms into a giant blue dragon and takes Robert hostage, prompting much panic throughout the crowd. Giselle takes Edward’s sword and pursues Narissa to the top of the building. Pip, who was freed by Edward, helps Giselle successfully defeat Narissa, who falls off of the building to the ground and explodes into magic glitter on impact.
A happy new life unfolds for everyone, showing Edward and Nancy – now animated – marrying in Andalasia; Giselle running a successful fashion business and forming a happy family with Robert and Morgan; while Nathaniel and Pip each become successful authors about their personal experiences in the real world, leaving everyone with their own ”happily ever after”.