On Halloween night, three siblings — Marnie, Dylan, and Sophie — learn that their grandmother, Agatha Cromwell, is actually a witch living in Halloweentown, a community where spooky beings have separated themselves from Earth's history to escape humans' fear and persecution.
The film begins with 13-year-old Marnie Piper (Kimberly J. Brown) and her mother, Gwen (Judith Hoag), arguing over why she and her younger siblings 12-year-old Dylan (Joey Zimmerman) and 7-year-old Sophie (Emily Roeske) can never go out for Halloween, and why Marnie cannot go to a Halloween party. Her mom offers no clear explanation. Gwen's mother Aggie (Debbie Reynolds), who is an expert witch, shows up for her annual Halloween visit. The children are happier to see Aggie than Gwen is, as Aggie openly encourages the children to get more involved in Halloween.
15-year-old Marnie has just spent 2 years with her grandmother Aggie. While hosting a wikt:mortality neighborhood Halloween party at their house, Marnie tries to impress a cute new boy, Kal, by showing him Aggie's magically-hidden room. Soon Aggie notices unwelcome magic (paranormal) symptoms. She and Marnie travel to Halloweentown to investigate and to fix the problem before the portal between Halloweentown and the mortal world, open only on Halloween, closes at midnight.
Two years after Halloweentown II: Kalabar's Revenge, Marnie Piper (Kimberly J. Brown) prepares to begin a new school year. She asks the Halloweentown Council to work toward openness between Halloweentown and the human world. She proposes bringing a group of Halloweentown students to her own high school in the mortal world. The Council is initially apprehensive, mostly due to the legend of the Knights of the Iron Dagger: a fanatical knighthood who wanted to destroy all things magical. The Halloweentown Witches' Council, however, agrees to accept the plan after Marnie mistakenly bets "all the Cromwell Magic (paranormal)" that her plan will work. If she does not prove she is right by midnight on Halloween, then her entire family will lose their magical abilities. Marnie, regretting what she said to the Council, wants to cancel the program she has made, but her grandmother Aggie (Debbie Reynolds) opposes, saying that they have nothing to fear.
18-year-old Marnie (Sara Paxton) decides to forego her original college plans and attend Witch University in Halloweentown. Marnie is offered a full scholarship for her good deeds and for her work in the previous years. Much to her mother Gwen's (Judith Hoag) dismay, Marnie goes, and her brother Dylan (Joey Zimmerman) is reluctantly forced along by Gwen to keep an eye on her. The school is not what it seems, as witches and Magician (fantasy) cannot use magic (fantasy); instead they learn about Shakespeare and old magic history. Marnie had thought she would learn how to use her magic and is now crestfallen. She runs into her old friend Ethan (Lucas Grabeel) and makes a new friend named Aneesa the Jinn (Summer Bishil). She also makes three new enemies in the Sinister Sisters, a triad of malevolent, extremely snobby, spoiled, and manipulative witches with whom Dylan is immediately infatuated and are the daughters of Silas Sinister (Keone Young).