The plot centers on Tatsuo Kusakabe and his two daughters Satsuki,10, and Mei, 4, who have just moved to a farmhouse to be near the hospital where their mother is admitted. Their mother is getting treatment for a long-term illness. The area where the house is located is enchanted.
Immediately after they move in, the two sisters realize that their new home is inhabited by playful and harmless spirits called susuwatari. These sprites aren’t visible to most humans, but they are visible to the two sisters. When the family settles in, the susuwatari leaves the house to find a new place to live.
In one encounter with the spirits, they lead Mei into the world of the susuwatari. She goes to a big camphor tree where she meets a much bigger spirit. That’s how Mei is introduced to Totoro, a big spirit creature that can fly. The creature introduces itself using roars that Mei interprets as Totoro. They become friends, and she even falls asleep atop Totoro.
Satsuki comes looking for her sister and finds her but doesn’t see Totoro. Mei tells her father about the experience, but she cannot find the camphor tree again.
The next time Totoro appears, Mei and Satsuko are waiting for their father’s bus on a rainy night. This time, Satsuko sees Totoro and offers the spirit an umbrella. Totoro gives them nuts and seeds in appreciation. The kids plant the seeds and wake up one night to find Totoro and his friends in a ceremonial dance around the seeds. The kids join in, and the seeds sprout into a giant tree. Totoro takes the children for a ride atop the tree.
Later, the children learn of a setback in their mother’s treatment. Mei is upset and goes to the hospital to take fresh corn to their mother, Yasuko. When Satsuko discovers Mei is missing, she goes to the camphor tree to request Totoro’s help. Totoro summons a Catbus to help find Mei. They find her and head to the hospital, where they overhear a conversation regarding their mum’s health. The setback was minor, and the mum soon returned home. The children celebrate and play with their friends.