Claire, a seven-year-old girl, is a chronic daydreamer living in the suburbs with her mother and little sister. One day, when her mother has to go out for an interview, She has to stay home and watch her younger sister, Caitlin. When she's lost in a daydream about living in a castle as a princess, her sister crawls around the house unattended. Her daydream ends and she realizes that Caitlin is gone. She manages to find her in a secret room in the staircase. They both go through a chest, discovering a locket and a diary. Claire reads one of the books and discovers that the princess' last name is similar to her family's, making her believe that they're related to the princess.
They both fall asleep and wake up in the middle of a forest. They're soon attacked by a couple of soldiers who say they're trespasers. A young boy intervenes and takes them to his secret hideout. The boy reveals himself to be Anthony and tells them about the Queen Emma's imprisonment and her twin sisters Carlotta's reign. He also reveals that he's Queen Emma's son that means Anthony is a prince and he's the only other person who knows how to break the spell. Claire declares, if Anthony isn't going to stop Carlotta, she's going to do it for him. She goes outside and discovers Caitlin is gone. She and Anthony get on their horses and go searching for her. It's revealed that Carlotta's guards captured her and Carlotta plans to raise her as her own daughter. She places guards at her bedroom door to ensure she doesn't escape.
Claire and Anthony put on some disguises and pose as menstrals. Carlotta allows them to sing to Caitlin, hoping that they can calm her down. Caitlin wriggles out of Carlotta's grasp and crawls to Claire, causing Carlotta to suspect. Claire convinces Carlotta to leave so they can sing Caitlin to sleep. Emma hears Anthony sings and realizes her son is alright. They succeed in lulling the guards to sleep and sneak Caitlin out of Carlotta's room. They go into kitchen, hoping to reach Emma's tower. However, Carlotta has summoned Emma and orders her to tell her where the Dream Sapphire is. Emma refuses and Carlotta sends her back.
In the meantime, Claire, Caitlin and Anthony climb into the dumbwaiter and try to get to the tower, but the rope snaps and it sends them to the moat. They encounter two alligators, which they outsmart and escape from. They reach the tower and discover Emma isn't there. The trio hide from the guards and Anthony is reunited with his mother. Claire introduces herself and her sister to her. Emma reveals that Sarah is Emma's younger sister that means Emma and Carlotta are her big twin sisters and Claire has the sapphire. Unfortunately, Carlotta discovers Caitlin is gone and demands the guards to find her and the others. However, the trio and Emma escape on their horses.
The quartet sneak back into the castle where Carlotta takes Caitlin back. Anthony loses the sapphire and Caitlin put the sapphire in a hole in the floor, which defeats Carlotta. All of the inanimate objects transform back into the servants and Emma makes Claire the new princess. In her honor, she sets up a ball to which multiple princes and princesses are invited. The ball concludes with Claire and Anthony kiss. Back at Claire's house, Claire wakes up and finds her mother has returned. She reveals that a new family has moved in across the street and Claire should go over to meet them. She meets a boy named Tony Travers, a reincarnation of Anthony, who she immediately takes an interest in.
- This is one of the few films that seems to be from original source.
- Carlotta's eyes change from brown to blue.
- Queen Emma and Carlotta are one of the few pairs of twins in the films.