While hiding from bullies in his school's attic, a young boy discovers the extraordinary land of Fantasia, through a magical book called The Neverending Story. The book tells the tale of Atreyu, a young warrior who, with the help of a luck dragon named Falkor, must save Fantasia from the destruction of The Nothing.

Once again, Bastian is transported to the world of Fantasia which he recently managed to save from destruction. However, the land is now being destroyed by an evil sorceress, Xayide, so he must join up with Atreyu and face the Emptiness once more.