Max is a lonely child in the suburbs of Austin who creates an imaginary world named Planet Drool, where all of his imagination and dreams come to life. He creates two characters; Sharkboy a young boy who was raised by sharks after losing his father at sea, and Lavagirl who can produce fire and lava, but has trouble touching objects without setting them alight. The two left Max to guard Planet Drool. In real life, Max's parents have little time for him and their marriage seems to be on the rocks, and he is bullied by fellow schoolmate Linus. However, he does receive friendship from Marissa the daughter of his teacher Mr. Electricidad Linus steals Max's Dream Journal and vandalizes it. The next day, a tornado rages outside the school, and moments later, Sharkboy and Lavagirl appear and ask Max to come with them to Planet Drool. Sharkboy and Lavagirl save some children from an out-of-control roller coaster with Max, they confront Mr. Electric, who quickly drops them in a part of Planet Drool called the Dream Graveyard, where some of Max's dreams have been dumped. They find Tobor, a robot that was never finished being built by Max, but offers them a lift to other parts of the planet. Whilst on the journey, the three form a friendship but they face hardships, such as Sharkboy's anger for the oceans being frozen over, and Lavagirl's desperation to find her true purpose on Planet Drool. They are pursued by Mr. Electric and his "plughounds" across the planet. They plan to visit the Ice Princess and obtain the Crystal Heart, which can freeze time, giving them enough time to get to the center of Planet Drool and fix the dreamworld using Max's daydreaming. However, they are captured by Mr. Electric and delivered to Linus's Planet Drool incarnation Minus, who has altered the dreamworld with Max's own Dream Journal and traps the three in a cage. Sharkboy gets annoyed by Lalas and has a shark frenzy, destroying the cage. Max retrieves the Dream Journal from Minus while he is sleeping, after the three escape. Max informs Sharkboy that his father is alive in his book, but when Lavagirl wishes to find out what it says about her true identity, she burns the book to ash. In rage, Lavagirl asks him why she was made out of lava, but Sharkboy tells max to let her cool down. With little time left, Max, Sharkboy and Lavagirl reach the Ice Princess after an encounter with the Ice Guardian, he hands over the Crystal Heart, but they find they are too late to stop the corruption since the ice princess is the only one who can use the Crystal Heart's power and she cannot leave her home. Mr. Electric fools Sharkboy into jumping into water filled with electric eels, seemingly killing him. Lavagirl jumps into the water to retrieve Sharkboy but dies moments later. Tobor's face appears and convinces Max to dream a better and unselfish dream, which in turn revives Sharkboy, who then races Lavagirl to a volcano where she is revived. Max witnesses her revival and concludes that her purpose is as a light against the dark clouds which have slowly engulfed Planet Drool's skies. Max gains reality warping as a Daydreamer and battles Minus, defeating him, and offering to make a better dreamworld between the two of them, which Minus agrees to. Mr. Electric refuses to accept the new dreamworld, and flies off to Earth to kill Max while he is dreaming. Max awakens back in his classroom in the middle of the storm. Mr. Electric materializes before Max and an astonished Mr. Electricidad. Max's parents get sucked into the storm, but are saved by Sharkboy and Lavagirl. Max gives the Crystal Heart to Marissa, allowing her to gain the Ice Princess' powers, which she uses to freeze and destroy Mr. Electric. Mr. Electricidad, Linus and Max all make peace with one another, and Max is reunited with his parents. In the end, Max informs his class that Planet Drool became a proper dreamworld again, Sharkboy became the King of the Ocean, and Lavagirl became Queen of the Volcanoes, including aquatic ones.