Linus Baker begins in routine: a cautious, meticulous caseworker who inspects orphanages for the Department in Charge of Magical Youth. His latest visit ends with quiet warmth among children he’s trained to assess from a distance, even as a headmistress challenges the system that will judge them. Back at the office, a culture of surveillance and demerits keeps everyone small; a summons to Extremely Upper Management ruptures Linus’s anonymity. In a dark chamber, a panel led by Charles Werner selects him for a classified month-long assignment on a remote island orphanage, requiring secret weekly reports sent only to them and immediate departure under strict silence.

Linus travels to the seaside village of Marsyas. A brusque call from Ms. (Zoe) Chapelwhite, the island’s sprite caretaker, forces him to open a Level Four dossier warning him to lock doors at night. The first file names Lucy—Lucifer—upending Linus’s expectations. Zoe collects him, navigates the villagers’ open hostility, and ferries him across. She vanishes mid-crossing, leaving him to face a sparse, redacted file on the orphanage master, Arthur Parnassus, and to arrive alone at a cliffside house.

Chasing his escaped cat through the garden, Linus meets Talia, a blunt gnome with a shovel; Theodore, a trinket-hoarding juvenile wyvern; Phee, a wary forest sprite; Sal, a timid shifter; and Chauncey, an eager, tentacled bellhop-in-training. An ominous proclamation from unseen Lucy rattles him. Moments later, Lucy tries theatrical intimidation—darkness and fire—until Arthur appears, disperses the display, and welcomes Linus to supper. Dinner reveals a family’s rhythm: joking, lessons, anxieties, and Arthur’s steady reassurance when Sal asks if their home will be taken away.

Arthur shows Linus the children’s rooms—Theodore’s turret nest, Lucy’s closet off Arthur’s room—and, in his cramped office, rejects labels while sharing each child’s history. The island’s isolation is deliberate: Zoe owns the land; the village accepts hush money; secrecy protects the children from a world eager to fear them. Linus clings to procedure, insisting he is here to investigate a potential danger, but the life in the house complicates his files. His first report notes both the gaps in the dossiers and the care he observes.

In class, “Expressing Yourself,” the children perform stories, verses, and boasts; with the group’s support, Sal trembles through a poem likening himself to fragile paper and earns applause that lifts him. Later, Zoe leads Linus to a beach where a crude raft bears a threat from the village. Together they send back a simple refusal—“NO, THANK YOU”—a small act that shifts his posture from witness to ally.

Arthur invites Linus to observe Lucy’s one-on-one session. Behind a stagey entrance is a modest room of rocks and records and a boy fascinated by music and morality. Arthur teaches philosophy; Lucy argues that goodness and error can coexist. Afterward, Arthur outlines his credo: hope, guidance, and shelter against prejudice. He reveals a prior caseworker—strongly implied to be Werner—rose into management, deepening the stakes of Linus’s confidential reports. On their next Saturday adventure, Zoe orchestrates a playful test in the woods; when “treasure” vies with rescuing Arthur, the children choose rescue, then share lunch at Zoe’s ivy-shrouded home. Phee grows a bush daisy and names it Linus, a tender sign that he is being seen.

Linus drafts Report #2, cataloging the house’s order and the children’s happiness, and stumbles on a scorched, padlocked cellar door he cannot place. He spends time with each child and, at last, with Sal in his room: a closet desk, a restored typewriter, and a boy who has survived a dozen placements and fears being moved again. Together they shift the desk into daylight. Sal confesses a past bite after being struck; Linus chooses empathy over distance, and trust deepens.

One night Arthur brings a refurbished record player Lucy found; a love song spins while they discuss safety versus freedom. Linus proposes a cautious outing to the village. A new memo from Werner demands less editorializing, scrutiny of unregistered Zoe, and more on Arthur’s background. Then Lucy’s nightmare shakes the island: a hallway warps, records whirl, and Arthur talks him back to “home.” Linus reassures Lucy that what’s broken can be mended, and Arthur proposes the promised outing to replace shattered music.

In town, moments of welcome and hostility collide. Helen, the hardware owner, warms to Talia’s expertise and later reveals herself as mayor. At the record shop, the clerk’s assistant locks Lucy in and attempts an “exorcism”; Lucy throws him into a wall. At an ice cream parlor, the owner refuses service; Sal panics and shifts; Lucy bristles; Arthur nearly unleashes his power until Linus steadies him with a touch. Helen intervenes, serves ice cream, and vows the children are welcome. A thick DICOMY packet awaits Linus: a warning about his “objectivity,” a required psych exam, and a key to the cellar to “see what Arthur is truly capable of.”

Haunted, Linus opens the cellar and finds burned tarps, scorched walls, and rows of tally marks. Arthur finds him there and, pressed, reveals his species: phoenix. He shows fiery wings and tells of a cruel former master who imprisoned him below after a plea to DICOMY was intercepted. Inspectors eventually shut the place; Arthur returned to reclaim it as a true home. Marsyas exists as an experiment under conditions that forced him to hide who he is from the children. Werner—once a caseworker and Arthur’s lover—used him and then rose through the Department. Linus urges truth for the children’s sake; Arthur admits feelings; Linus, fearing manipulation and bound by duty, says he must return when the month ends.

Before that end, life continues: lessons, play, and Theodore’s treasured brass button given to Linus. When villagers gather, Zoe raises a salt road across the sea so Arthur and Linus can confront the crowd. A rock flies toward Helen; Arthur, manifest as a phoenix, shatters it and then speaks plainly: they are afraid, and so is he, but he will protect his wards. Helen enforces the law; the mob disperses. The display leaves Arthur lighter and Linus more certain of what “home” might mean.

The children and Zoe stage a surprise farewell: a mock expedition, lanterns, and dancing to Nat King Cole. Lucy senses truths and names the “magic in the ordinary.” Arthur asks Linus to stay; Linus, convinced duty lies elsewhere, declines. Zoe drives him to the train at dawn and tells him to choose life over rules; he leaves in the rain, bereft.

Back in the city’s gray monotony, Linus cleans, frames a photo the children slipped into his suitcase, and faces Extremely Upper Management with a one-sentence recommendation: keep Marsyas open under Arthur Parnassus. Pressed, he details each child as a person rather than a risk, condemns euphemisms and prejudice, and risks his job for the truth of what he saw. Judgment is deferred.

Weeks pass. Doreen delivers his approved report—signed by the panel—securing Marsyas. Linus resigns, smuggles old case files to help others, and returns. Helen ferries him at sunset. The children extract promises—help in the garden, days in the woods, laundry with tips, buttons for Theodore, comfort for nightmares—and Linus accepts them all, explaining he left to be their voice and came back to belong. In private, he tells Arthur what he risked; Arthur asks him to stay; they seal it with a kiss as the house erupts in cheers.

In spring, change widens: an anonymous exposé rattles the Department’s leadership; Arthur prepares to testify; Helen pushes inclusion in Marsyas. She brings a plea for help: David, an undocumented yeti, needs a home. Linus and Arthur agree, deciding to transform the old cellar into a cold room—a past of harm remade into care. As they advance a joint adoption petition, Lucy gleefully announces the adults will marry, and the home in the cerulean sea grows by choice, not permission.