Back in the home of the Lost Boys Wendy prepares dinner and reads them a story after they have eaten. After the Boys retire to their beds, Wendy and Peter are left alone. They start to fall in love, but Peter Pan returns to his juvinile self and flies up to his bed. Wendy grabs her needle and thread and mends the Boys’ tattered clothing. After a while she falls asleep. Moments later Captain Hook and his crew break into the home and kidnap all of the children except for Peter Pan - Captain Hook couldn't find him. Peter Pan wakes up to find everyone missing. Tinkerbell quickly explains to him what happened.
Peter Pan and Tinkerbell fly to Captain Hook’s ship, the Jolly Roger. Meanwhile, Captain Hook and his gangly crew are celebrating what they think is their victory. They start pushing the children to walk the plank, where beneath it the crocodile waits. Peter Pan comes to their rescue before the children are pushed overboard. A great fight takes place between Peter Pan and Captain Hook. Eventually Captain Hook is overpowered and falls into the water with the crocodile. The Lost Boys take over the ship now that the pirates have no leader. Peter Pan, Tinkerbell, the Lost Boys, Clara and her brothers celebrate their victory.
The celebration dies down and Wendy realizes that she is quite homesick. She doesn’t want to stay a child forever; she wants to go home. Clara and her brothers tell everyone goodbye. Tinkerbell sprinkles her fairy dust on them and they fly home.
Wendy, Michael and John come home to find Mr. and Mrs. Darling, along with Liza and Nana, stricken with grief over their disappearance. As soon as they show up, everyone is happy and tears of joy are shed. Wendy had asked Peter Pan if he would like to come back with her, but unlike Wendy, he didn’t want to grow up.
