The movie begins with Pete, a five years old boy, on a road trip with his mom and dad. Pete reads from his book and his parents try to explain what he is reading. Unfortunately, they end up in a car crash while trying to dodge a deer on the road. Pete’s parents are killed instantly but somehow, Pete manages to survive. When he gets out of the car, he gets chased into the forest by a pack of wolves. He gets rounded up by the wolves and has nowhere else to run. Then, a loud noise is heard in the forest and this scares the wolves away. A very large dragon with green fur and yellow eyes appears and moves towards Pete. Pete is scared but the dragon makes a goodwill gesture to him by giving him his bag. The dragon then stretches its hand forward and Pete climbs its hand. Then the dragon takes off with Pete and flies away.
Six years later, An old man tells the story of his encounter with a dragon to a group of little kids. He says that he met the dragon in the woods. His daughter, Grace, who is a police officer comes out of the house and tells the kids that she is always in the woods and has never seen a dragon before. He tells her that just because she doesn’t see something doesn’t mean that it isn’t there. She leaves the house telling them that she is going to the woods. Pete is then shown running after a rabbit. When he finally catches it, a bear comes from behind him and roars at him. Pete roars back at it and the green dragon pops it’s head out from the woods. The bear sees the dragon and runs away. Pete then sees the dragon and calls out it’s name, Eliot which he gave to the dragon. Pete and Eliot play around the forest and it is shown that the dragon, Eliot can turn invisible. The next day, while Pete and Eliot walk around the forest, they see Grace passing and Eliot turns invisible. Pete follows her to her destination where she drops her bag and picks up a blue spray to spray over a red mark on a tree. While she sprays, Pete runs and takes something from her bag. She hears some movement but she thought it was from her partner who called out to her for them to leave. When they leave, Eliot moves close to Pete and sneezes on him and as Pete falls, the item he took accidentally opens revealing a picture in the compass. The next morning, Pete wakes up to hear the noise of workers in the forest as the cut down trees. Pete leaves Eliot, still sleeping and goes toward their location to watch them from afar off. He sees Grace arriving at the location with a man named Jack and his daughter in a car. While Grace and Jack talk to each other, Natalie, Jack’s daughter tells them that she has to go to school but they could not hear her. She come out of the vehicle and looks at the area. She sees Pete from a distance and Pete runs away. She follows him and tries to tell him to wait but he does not stop. Pete climbs a tree to get away from her but she also climbs with him. But while she climbs the tree, she slips and falls and Pete tries to save her. He manages to catch her but she still falls and injure her knee. The workers heard her scream so they all run towards where she is. Natalie asks Pete what his name is and how old he is. Pete tells her he is 5 years old and she admits that he is pretty big to be 5 years. As she tells him her name, the workers get to where they are and asks Natalie what happened. She tells them that she fell out of a tree while she was following Pete. Grace tries to ask him some questions and she sees her compass on his neck. Pete runs away and they try to get a hold on him. He falls while climbing a tree and hits his head. When Eliot wakes up, he tries to look for Pete but he comes close to where the workers are working. He mistakenly falls a tree, alerting the workers that something is out there. Gavin, one of the workers picks his gun and tells the rest of the crew “Let’s go hunting”.
Pete wakes up in the hospital and looks through the window in the hallway. He sees Grace and some other people discussing about how he got out there. Natalie goes to Pete’s room to check on him but doesn’t find him there and She alerts Grace and the others. Pete runs around the town, trying to get back to the forest. While running, a dog barks at him but he scares the dog off. He’s later found by Grace and some other police officers. Meanwhile, Gavin and some workers moves around in the bush and find a very large footprint. Grace and Natalie take Pete to their house in a car. When they get there, Pete attempts to run away. He tells Grace that he wants to go home. Grace tells him that she will take him home tomorrow if he stays with them. She also explains to him that she vowed to take care of everything in the woods including him. Pete asks if she’ll also take care of Eliot too and she asks him who Eliot is. But before Pete replies, Jack comes out of the house and calls their attention. That night, Natalie shows Pete how to eat his sandwich. Gavin and his crew approach a big tree with a cave underneath it. Gavin enters the cave and finds a book. As he shows the book to the other workers, Eliot gets angry and attacks them. He pursue them till they get to their car. Gavin tries to shoot the dragon but his gun gets ruined by Eliot. Eliot sneezes on Gavin before Gavin gets into the car and drives away. On the other hand, Grace and Natalie helps Pete to settle in as they show him somethings. Eliot flies around the town trying to find Pete. While Grace tries to ask Pete who Eliot is, she receives a call from the head of police and he tells her that Pete has been missing for 6 years after his parents died in an accident. Natalie asks Pete if Eliot is his imaginary friend and Pete replies that he is real. Eliot flies over the hospital looking for Pete. He sees Gavin’s car and decides to follow him. Pete draws what Eliot looks like and shows it to Natalie. She tells him that Eliot looks like a dragon. Grace comes into the room and tells Natalie that she needs to talk to Pete alone. Grace asks him if he remembers how he got to the woods and he tells her that he and his parents where going on an adventure. He asks him who Eliot is and he shows her his drawing. Pete tells her that she would see him tomorrow since she is taking him back to the woods. Gavin goes to Jack’s place and tells him that the story that Meacham, Grace’s father use to tell them was true and that he just saw a dragon. Jack finds it hard to believe him and Gavin leaves angrily. Eliot finds his way to Jack’s place and he looks through the window and sees Pete happy. He gets sad and returns back to the cave. That night, Grace goes back home and asks her father what he actually saw when he met with the dragon. He tells her that he was out hunting, and he saw a dragon and tried to shoot it. But he felt something like magic and lowered his gun. He said he looked at the dragon and the dragon stared back at him before disappearing into the woods. Grace tells him that she knows the woods well and she couldn’t have missed a dragon but Meacham tells her that she missed Pete. The next morning, Grace goes over to pick Pete and Natalie as they go to the woods. Grace tells Pete that her dad will be accompanying them. When Jack gets to work, he sees a note from Gavin telling him that he is going hunting. Pete leads them to the cave and goes into it to meet Eliot. Jack also arrives at the woods and tries to look for them. Pete comes back out with the dragon and Natalie, Grace and Meacham are all stunned. As Natalie pats Eliot, Gavin shoots it with a tranquilizer as he and his crew tries to capture the dragon. Jack hears noises and runs towards that location. Eliot tries to escape but gets very weak due to the tranquilizers shot at him and he falls down, destroying the cave where they stay. Pete gets very sad and goes to pat the dragon. Jack arrives and is very surprised to see that the dragon is real. Jack and his crew take the dragon back to the town’s sawmill. They put the dragon inside a building. Meacham then asks Gavin what he’s going to do with the dragon and Gavin says he has no idea yet. Jack and Grace enters the building and as Grace pats the dragon, it’s fur glowed. As the police arrives at the sawmill, Natalie and Pete manages to sneak into the building. Jack and Gavin tries to brief the police on what is inside the building and while they are at it, Natalie locks the door from inside. Natalie and Pete unchains the dragon and tells to fly away. Gavin tries to open the door but when he finally does, he doesn’t see the dragon there. The sheriff asks him what they are looking for and Gavin tells him that it got out through the open roof. The sheriff asks what it is and Gavin and Jack tells him it is a dragon but he refuses to believe them. Meanwhile the dragon is still in there but turned invisible and Grace saw it so she went outside to tell Jack. Pete and Natalie looks for a way to escape with Eliot when Meacham offers to drive the truck for them. They allow him and he turns on the engine and drives out through the walls of the building. Gavin yells at the workers to follow the dragon and as he tries to run, Grace grabs his keys and throws it away in order to slow him down. They all chase down the truck and Pete tells Eliot to fly. Eliot attempts to fly but falls back down and in the process, the brake of the truck fails. Gavin drives fast and matches up with the truck and tells Meacham to pull over but Meacham refuses. Gavin speeds up and parks the car far ahead and stands in front of the car, hoping that Meacham will stop the truck. Meacham indeed tries to stop the truck but the brakes doesn’t work and he hits the Gavin’s car. But Gavin and the others were able to jump out of the way. When the truck finally stops, Eliot sees Jack’s car approaching them and he gets annoyed and runs towards them and breathes fire on the floor of the bridge and Pete runs to tell Eliot to stop. When he stops, Gavin runs to help Jack and Grace who are both inside the car. But the bridge starts to collapse and the car starts to fall. Eliot then rushes to stop the car from falling. But the bridge still collapses and Jack, Grace and Eliot all fall down the bridge. But Eliot flies back up with Grace and Jack on its back. When Eliot drops them, Pete hops on Eliot’s back and they fly away. Grace tries to stop him from going but to no avail. When Eliot and Pete gets to the cave, Pete tells Eliot that they can’t stay there. Eliot shows Pete a page in his book that he should be with family. Pete tells him that he doesn’t want to leave him and then hugs him. Grace, Jack and Natalie goes back home sad but when they get home, they meet Pete waiting for them.
In the ending scene, Jack, Grace, Natalie and Pete goes on a road trip looking for Eliot and they find him with other dragons.