Early 20th-century Europe was a time and a place rife with conflicting forces, from the battlefields of World War I to the peaceful countryside of rural England. Scientific advances such as electric light and photography appeared magical to some; spiritualism was championed by Sir Arthur Conan Doyle while his friend Harry Houdini decried false mediums who prey upon grieving families. J.M. Barrie's Peter Pan charmed theatergoers of all ages. Young Frances Griffiths, whose father is missing in action, arrives by train to stay with her cousin Elsie Wright in rural Yorkshire.
Polly Wright, Elsie's mother, is deep in mourning for her son Joseph, a gifted artist who died at the age of ten, and she keeps Joseph's room and art works intact. Elsie is not allowed to wear colours or to play with his toys, but she has taken the unfinished fairy-house he built up to her garret bedroom where her doting father, Arthur, regales her with fairy tales. He is a bit of a local wunderkind, responsible for the electrification of the local mill, where children as young as Elsie go to work. He is also an amateur photographer and chess player. When Frances arrives she and Elsie discover a shared fascination with fairies, whom they encounter down at the "beck", a nearby brook. They abscond with Arthur's camera one afternoon to take pictures of the fairies, hoping to give Polly something to believe in. When she comes home after attending a meeting of the Theosophical Society, where she hears stories of angels and all sorts of ethereal beings, she finds Arthur reviewing the prints in disbelief, but she thinks they are real. She takes them to Theosophist lecturer E.L. Gardner, who has them analysed by a professional and then brings them to the attention of Sir Arthur Conan Doyle. The photos are pronounced genuine, or at least devoid of trickery.
No one except Houdini believes that young children could be capable of photographic fraud, and Conan Doyle himself arrives at the girls' home with Houdini, Gardner and two new cameras. Arthur catches Houdini poking around and tells him point-blank that he doesn't believe that the fairies are real, but that no trickery took place in his darkroom either. Abetted by the buffoonish Gardner, Elsie and Frances soon come up with two more photos and Conan Doyle has the story published in The Strand Magazine, promising everyone's names will be changed. But a newsman soon identifies the beck near Cottingley, tracing the girls through the local school and besieging the family. Hundreds of people invade the village in automobiles and on foot, and the fairies flee the obstreperous mobs. By way of apology to the fairies, the girls finish Joseph's fairy-house and leave it in the forest as a gift.
The girls are invited to London by Conan Doyle, where they embrace their celebrity and see Houdini perform. In a quiet moment backstage Houdini asks Elsie if she wants to know how he does his tricks, and she wisely declines. And when a reporter asks, he declaims, "Masters of illusion never reveal their secrets!" Back in Yorkshire, while the girls and Polly are away, Arthur has a chess match with a local champion reputed to be mute, and the newsman breaks into their house. He discovers a cache of paper dolls in the form of fairies in a portfolio in Joseph's room, but he is frightened away by the apparition of a young boy, leaving the evidence behind. Arthur wins his match, wringing a shout from his opponent, and another myth is debunked. After the children return home, the fairies reappear, and finally, Frances' father comes home as well.
- Peter O'Toole as Sir Arthur Conan Doyle
- Florence Hoath as Elsie Wright
- Elizabeth Earl as Frances Griffiths
- Harvey Keitel as Harry Houdini
- Paul McGann as Arthur Wright
- Bill Nighy as Edward Gardner
- Phoebe Nicholls as Polly Wright
- Anna Chancellor as Peter Pan
- Mel Gibson in an uncredited cameo appearance as Frances' father