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A carpenter finds a talking piece of wood and gives it to his poor neighbor, Geppetto, who wants to build a marionette. Geppetto carves the block into a marionette puppet and names him his son, Pinocchio. However, Pinocchio runs away as soon as he learns to walk. The marionette is caught by a Carabiniere, but he assumes that Pinocchio has been mistreated and imprisons Geppetto. Pinocchio goes back to Geppetto's house where he accidentally kills a talking cricket who had warned Pinocchio of the perils of disobedience and hedonism. That evening, Pinocchio falls asleep with his feet on the stove, and wakes to find that they have burned off. Geppetto is released from prison and makes Pinocchio a new pair of feet. In gratitude, Pinocchio promises to attend school and Geppetto sells his only coat to buy him a school book. On his way to school the next morning, Pinocchio encounters the Great Marionette Theatre and he sells his school book in order to buy a ticket for the show. The marionettes on stage recognize him in the audience and call out to him, angering the puppet master Mangiafuoco. The puppet master initially decides to use Pinocchio as firewood, but ultimately releases him and gives him five gold pieces to give to Geppetto.
As Pinocchio travels home to give the coins to his father, he meets a fox and a cat. The Cat pretends to be blind and the Fox pretends to be lame. A white blackbird tries to warn Pinocchio of their lies, but is eaten by the Cat, at which point the Fox states that the blackbird talked too much and had to be silenced. The two animals convince Pinocchio that if he plants his coins in the Field of Miracles outside the city of Catchfools, they will grow into a tree with one or two thousand gold coins. On the way to the field, they stop at an inn, where the Fox and Cat gorge themselves on food at Pinocchio's expense and ask to be awoken by midnight. Two hours before the set time, the pair abandon Pinocchio, leaving him to pay for the meal with one of his coins. They instruct the innkeeper to tell Pinocchio that they left after receiving a message stating that the Cat's eldest kitten had fallen ill and that they would meet Pinocchio at the Field of Miracles in the morning. They take off ahead of Pinocchio and disguise themselves as bandits while Pinocchio continues on toward Catchfools, despite warnings from the Ghost of the Talking Cricket he had killed earlier. The disguised Fox and Cat ambush Pinocchio, but the puppet escapes to a white house after biting off the Cat's paw. Upon knocking on the door, Pinocchio is greeted by a young fairy with turquoise hair who says she is dead and waiting for a hearse. Unfortunately, while Pinocchio is speaking with the Fairy, the bandits catch him and hang him in a tree. After a while, the Fox and Cat get tired of waiting for the puppet to suffocate and leave.
The Fairy has Pinocchio rescued by summoning a falcon to get him down and having her poodle servant Medoro pick him up in her stagecoach. The Fairy calls in three famous doctors to tell her whether Pinocchio is dead. Two of them are an owl and a crow who are unsure of Pinocchio's status. The third doctor is the Ghost of the Talking Cricket, who says that the puppet is fine, but has been disobedient and hurt his father. The Fairy administers medicine to Pinocchio who consents to take it after four undertaker rabbits arrive to carry away his body, as he will be dead soon if he does not take the medicine. Recovered, Pinocchio lies to the Fairy when she asks what has happened to the gold coins, and his nose grows until it is so long that he cannot turn around in the room. The Fairy explains that Pinocchio's lies are making his nose grow, and calls in a flock of 1,000 woodpeckers to chisel it down to normal size. The Fairy sends for Geppetto to come and live with them in the forest cottage.