Bastian's dream to get a sibling becomes true when his father re-marries, but soon he has trouble with his new stepsister Nicole and with a gang of school bullies, the Nasties. Hiding in the school library, Bastian finds his favorite book of THE NEVERENDING STORY, where it is later found by Slip, the gang leader. The latter recognizes the power of the book and begins to form Fantasia after his bad intentions. When the chaos becomes worse the Child-like Empress requests Bastian to move back to the real world, get the book back and save Fantasia. Accidentally some Fantasia characters travel with him to reality, but get lost in different places. Meanwhile Slip and the other Nasties spread anarchy. Finally, Bastian gets support from Nicole, who begins to believe in the power of Fantasia.