In Italy, while drunk twenty years after losing his son Carlo to an aerial bombardment during World War I, woodcarver Geppetto uses the pine wood planted in Carlo's grave to create a puppet. The Wood Sprite brings it to life, christening him Pinocchio, and assigns Sebastian J. Cricket, who formerly lived inside the pine wood, to guide him morally, promising him a wish in exchange. Geppetto becomes fed up with Pinocchio's antics, and the village's Podestà orders to send him to school. On his way, Pinocchio is intercepted by showman Count Volpe and his monkey Spazzatura, who bring Pinocchio to their circus to perform. Geppetto arrives to take him back, resulting in a confrontation that ends with Pinocchio being fatally hit by the Podestà's truck. In the afterlife, he meets the Wood Sprite's sister Death who explains that he is immortal and revives him when an hourglass empties, cautioning that the more he dies, the more time he will spend in the afterlife.
After returning to Earth, Pinocchio decides to earn money for Geppetto by performing in the circus, and also avoid being conscripted into the Army by the Podestà, who thinks his immortality makes him the ideal soldier. A jealous Spazzatura, the former star, reveals to Pinocchio that Volpe has been lying to him about sending half their profits to Geppetto. Hearing this, Volpe beats Spazzatura, upsetting Pinocchio who performs a song ridiculing Benito Mussolini while he is in attendance. Mussolini has Pinocchio executed and the circus burned. Once revived, Pinocchio is taken by the Podestà to military recruit training, where other boys are trained for war. He befriends the Podestà's mistreated son Candlewick. At a training game, Pinocchio and Candlewick win in a tie; the Podestà orders Candlewick to shoot Pinocchio, but he refuses and stands up to his father. The training camp is then bombed by Allied aircraft, killing the Podestà, while the boys flee. Pinocchio is captured by Volpe, who tries to burn him to death as revenge for ruining his career. Spazzatura saves Pinocchio and attacks Volpe, resulting in all three falling off a seaside cliff, which kills Volpe.
Lost at sea, Pinocchio and Spazzatura are swallowed by the Terrible Dogfish. Inside its belly, Pinocchio and Spazzatura find Geppetto and Sebastian, also swallowed during their search for Pinocchio. Ideated by Sebastian, Pinocchio lies to make his nose grow into a large branch, forming a bridge leading out of the monster's blowhole. As the dogfish attempts to eat them again, Pinocchio sacrifices himself by detonating a naval mine inside the dogfish, killing them both. Upon meeting Death again, Pinocchio demands to be sent back early to save Geppetto from drowning. Aware that it will make him mortal, Pinocchio breaks the hourglass to return, saving his father and dies. The Wood Sprite reappears to a mourning Geppetto and Sebastian, who wishes for her to revive Pinocchio. He, alongside Geppetto, Sebastian, and Spazzatura return home to live together as a family. Outliving all of them, Pinocchio decides to travel the world until his time comes.