The ballet opens in the Darlings childrens room. Its a pleasant scene while Michael, John, Wendy and their dog, Nana, play one last time before the evening folds. Mr. and Mrs. Darling come into their bedroom with Liza, their maid, and prepare the children for bed. Mr. and Mrs. Darling are going to a dinner party after the children are tucked in.
When the children finally fall asleep, their parents leave and the maid returns to her quarters. After things quiet down, Tinkerbell, Peter Pans fairy, flies through the open window with Peter Pan quickly following. Peter Pan is frantically looking for his lost shadow. He finds his shadow, but he cant get it to stick to him. Wendy wakes up to see Peter Pans dilemma. She takes out a needle and thread and sews Peter Pan and his shadow back together. John and Michael finally wake up to the evenings commotion. Peter Pan, with the help of Tinkerbells fairy dust, teaches all of them how to fly. The children fly out the window following Peter Pan to Never Never Land.
Wendy, Michael, John, Peter Pan and Tinkerbell arrive in Never Never Land in the evening. Tinkerbell flies down to Tootle, one of the Lost Boys, and tells him that Peter Pan has brought some prey with him. Tootle takes out his bow and arrow and shoots Wendy down from the sky. When Peter Pan tells them what they have done, they realize Tinkerbell had tricked them out of jealousy. Tinkerbell heals Wendy and a celebration follows. Their celebration is cut short, however, when Captain Hook and his posse emerge onto the scene. The Lost Boys scatter in the forest. Captain Hook only wants to battle Peter Pan. As they begin to fight, Captain Hook hears a loud ticking sound. He realizes that its the crocodile that bit off his hand and swallowed a clock. Captain Hook and his crew flee to their ship.