Fifty years before the main story, a young boy named David Olson sneaks out of his house at night in Mill Grove, Pennsylvania. A terrifying supernatural entity called "the hissing lady" pursues him, mimicking the voices of his mother and grandmother to lure him off the street, where she cannot reach him. Despite his fear, David enters the Mission Street Woods to complete a mission he believes will prevent the hissing lady from escaping and killing his older brother, Ambrose.
In the present day, seven-and-a-half-year-old Christopher Reese and his mother, Kate, flee Michigan to escape Kate's abusive boyfriend, Jerry. Kate, a widowed single mother whose husband died by suicide, chooses Mill Grove because it is small and tucked away, with a great elementary school. She secures a job at Shady Pines, an elder care facility, and enrolls Christopher in Mill Grove Elementary, lying about their address to place him in a better school district. Christopher, who struggles with reading and math, silently vows to protect his mother.
At school, Christopher endures bullying from classmates Brady Collins and Jenny Hertzog but bonds with a boy named Special Ed and twin brothers Mike and Matt. He notices a cloud shaped like a face that seems to follow him and respond to his commands. One afternoon, the cloud lures Christopher into the Mission Street Woods, where he finds a clearing with a single crooked tree and a dark coal mine tunnel. He touches a child's hand in the darkness and vanishes for six days.
Mary Katherine MacNeil, a devout seventeen-year-old from Mill Grove, finds Christopher when he emerges from the woods. He tells the sheriff and a psychiatrist that a "nice man" with white hair and a limp guided him out, but no evidence of this person exists. In the hospital, Christopher meets Ambrose, a sharp-tongued war veteran with failing eyesight, and Mrs. Keizer, a patient with Alzheimer's disease who screams that death is coming on Christmas Day.
After his release, Christopher undergoes a dramatic intellectual transformation: He aces a math quiz with a perfect score in 42 seconds, reads fluently for the first time, and solves problems far beyond his grade level. He also develops persistent headaches. Kate plays the lottery using the answers from his test, and every number matches. The winnings allow her to buy a house on Monterey Drive, backing up to the Mission Street Woods. There, Christopher sneaks out at night to communicate with the nice man through a white plastic bag hanging on a tree branch. The nice man tells Christopher he must build a tree house in the clearing before Christmas.
Christopher enlists his friends to help. During the build, they unearth a child's skeleton near the tree, which the sheriff identifies through DNA as David Olson, Ambrose's brother, buried alive 50 years earlier. The sheriff also keeps a Missing poster for Emily Bertovich, a young girl who vanished from a neighboring town months before. Meanwhile, Kate begins dating the sheriff.
The hissing lady begins hunting Christopher through nightmares. In a terrifying dream at school, a monstrous version of his teacher tries to force him to reveal who is helping him. Christopher's supernatural heat burns people he touches, and an itching contagion spreads through the town. He follows coded clues left by David Olson, who has been trapped on the imaginary side for 50 years as the hissing lady's captive. David's messages, hidden in a library copy of
Frankenstein and in Christmas cards, warn that the nice man is imprisoned in the basement of David's old house.
Christopher enters the imaginary world alone and rescues the nice man from the hissing lady's torture chamber. His condition worsens until Kate, torn between believing her son and fearing he has inherited his father's mental health condition, hears Christopher reveal intimate details about her past that no one else could know. She dumps his prescribed medication and tries to flee Mill Grove. Mary Katherine, manipulated by the devil's whispered texts and shaken by a mysterious pregnancy, swerves to avoid a deer and crashes into Kate's car. Christopher falls into a coma.
With Christopher unconscious, the town descends into madness. A supernatural flu manifests as fever, obsessive itching, and escalating violence. On the imaginary side, the hissing lady captures Christopher, but the nice man rescues him and hides him in an underground bunker. Through a telepathic connection, the nice man reveals that the tree house has been transforming Christopher into something approaching God, omniscient and capable of healing. The only way to escape, the nice man claims, is to kill the hissing lady and take the key buried in her neck.
Kate, Ambrose, and the wounded sheriff piece together the truth from David Olson's diary, found hidden under a loose floorboard. The diary chronicles David's identical experience 50 years earlier, including his own tree house, and contains a hidden message encoded in erratic capitalization: "TELL AMBROSE IT'S A TRAP." Kate tears wallpaper off Christopher's bookshelf to find a final warning carved into the wood: "DO NOT KILL THE HISSING LADY. SHE IS THE ONLY THING KEEPING THE DEVIL IN HELL."
On Christmas Eve, the nice man whispers through dreams to every person in town, drawing them to the clearing. Mrs. Henderson, the school librarian, stitches townspeople into 'mailbox people,' figures with sewn eyes and mouths, each holding a string connecting them to the next in line. Christopher enters the imaginary side and discovers a nightmarish landscape where people relive their worst torments for eternity. He realizes this place is not an imaginary world but Hell itself. As the nice man urges him to kill the hissing lady, Christopher watches David desperately try to save her and sees her tears. He finally understands: The hissing lady was never the villain. She is God's daughter, who volunteered to serve as Hell's warden. The nice man is the devil, who has been manipulating children into killing his jailer so he can escape to Earth.
Christopher refuses. He transfers his power to his dying mother, giving her the light of "one hundred billion stars." Kate fights the devil on the burning street while Christopher frees the mailbox people by telling them they can drop the strings they hold. The freed souls, including Christopher's father and a long-missing girl named Emily Bertovich, attack the devil with their ascending light. Ambrose reunites with David, and the two brothers rise to Heaven together. Christopher realizes his own eyes have been stitched shut; he tears the stitches free, realizing the door out of Hell was never locked, and that forgiveness and love, not violence, defeat evil.
On the real side, Kate sets the tree house on fire, trapping the devil inside. The hissing lady pulls him back into Hell, locks the door, and ascends to Heaven. The town awakens on Christmas morning as the flu breaks and families reconcile. In the epilogue, the devil begins whispering anew, searching for the next child. Mary Katherine survives her injuries and learns her baby is alive. Her parents and her boyfriend, Doug, rally around her. A final whisper tells Mary Katherine she is having a Son, suggesting a new cycle of divine purpose has begun.