Plot
Mo and Resa Folchart read the fairy tale "Little Red Riding Hood" to their baby daughter Meggie, as a red velvet hood appears out of thin air. Twelve years later, Meggie visits an old book shop in Europe with her father, unaware that he is secretly looking for a copy of the book Inkheart. Shortly after Mo finds the book, she encounters a horned marten outside the shop and it tries to bite her fingers.
A man appears from the shadows, claiming to be an old friend. Mo comes out of the shop, recognizing the man as Dustfinger, who quickly asks him to "read him back into the book". Father and daughter flee to visit her great-aunt Elinor in Italy.
There, Mo tells Meggie that nine years ago, while reading to her from Inkheart, he inadvertently brought Dustfinger out of the book and into the real world, through a gift he possessed from birth. Unfortunately, the book's villain Capricorn and his henchman Basta also came out of the book. Fleeing with his infant daughter, Mo realizes Resa had been taken into the book.
Capricorn arrives with Basta, who captures the group, destroys Elinor's library and takes Inkheart. Mo, Meggie, and Elinor are taken to Capricorn's new castle in the real world. During their imprisonment, Mo explains his gift to Meggie and Elinor, stating that when he reads a person or an object out of a book, someone from the real world is sent into it, hence his wife's disappearance.
Capricorn forces Mo to use his gift, acquiring treasure from one of the stories in The Arabian Nights, and imprisoning Farid, one of the 40 Thieves. Dustfinger, who was promised a return into the book, is betrayed by Capricorn. The group escapes using the tornado from The Wonderful Wizard of Oz.
Elinor leaves to recover what is left of her library as the others head for Alassio, the town of Inkheart author Fenoglio, who may have another copy. Dustfinger is initially afraid of learning his fate in the book, but eventually joins them. When they meet Fenoglio, the author's ecstatic reaction to seeing his creation alive leads Dustfinger to learn he dies at the end of the book while trying to save his marten, Gwin.
Dustfinger berates Fenoglio before eventually telling Mo that Resa is trapped in the real castle and has no voice. So, Mo and Dustfinger take Fenoglio's car and Farid stows away in the trunk. At Fenoglio's house, Meggie begins reading out loud, bringing Toto from The Wizard of Oz. Basta bursts in with his men and takes the group to Capricorn.
Elinor, having decided to stay, realizes something is amiss and pursues them. At the castle, Capricorn orders Meggie to bring a monster called the Shadow out of Inkheart and threatens to harm Resa if she does not comply. Mo sneaks into the castle. Dustfinger is captured, but escapes after Meggie informs him of Capricorn's intentions.
Mo attempts to free Meggie and the others, as Capricorn forces her to read the Shadow out of the book. Dustfinger returns to the castle with Farid and sets it on fire. The distraction allows Fenoglio to give Meggie a rewritten part of Inkheart, which should help Meggie stop Capricorn's plan.
As Elinor arrives with the creatures Capricorn imprisoned, Meggie writes out the story on her arm. As she reads it out, Capricorn turns into ashes as the Shadow devours him, his henchmen vanish, the Shadow explodes, and all the read-out creatures are returned where they belong. In addition, she grants Fenoglio's wish to live in the world he created, while reuniting herself and Mo with Resa, whose voice is restored. Dustfinger is also safely read back into Inkheart, where he is reunited with his wife Roxanne.
In the real world, Farid reveals he kept Gwin with him, thus allowing Dustfinger to avoid his own death. As Mo and his family leave with Farid, Meggie agrees to teach him how to read and Farid agrees to teach her how to use dragon breath, Dustfinger's fire breathing ability, which Farid learned.
