In 1967- in a far corner of the universe, the Witch of the Oak Forest is in a rage at not having been invited to the christening of young Princess. Placing a curse into a glass orb, the witch proclaims that the young girl will never find love no matter how hard she tries.In the distant future, in 2267, a young boy walks through a dump on a distant planet, when something catches his eye. Retrieving it, he finds it to be a glass orb.The film then returns us to present day (1985). In Tomobiki-cho's high school library, Lum and Shinobu are having a conversation regarding a saying in Japan that two people who are destined to be together, are connected by an invisible red thread to their pinky fingers. When Lum gigglingly suggests that she and Ataru are connected in such a way, he non-chalantly denies such a thing.On their way home from school, Lum says that they should go somewhere fun for a date. As they reach a small hill, they notice a large zeppelin dropping fliers. Lum flies off to retrieve one, and finds that it tells of the grand opening for a new theme park in the area, called Tomobiki Marchenland (or Tomobiki Fairytale Land).Lum, Ataru, and their friends attend the opening day festivities, but while Lum and Ataru enjoy themselves, their friends are set upon by all manner of bizarre incidents:-Shutaro and Shinobu encounter the spirit of Omichiyo, Shutaro's first pet octopus.-Megane, Kakugari, Perm and Chibi are shocked when they encounter child-like versions of themselves.-Ryunnosuke, who is selling snacks for the Hama Tea Shop in the park, follows a white rabbit into a floating door, where she encounters a vision of herself in a dress and blonde wig.-Sakura and her uncle Sakurambo are surprised when they find through some powerful magic, they are unable to set foot in the park.Lum, Ataru and their classmates then attend a magic show put on by a man named Ruu, the Master Magician. When a lovely assistant asks for a volunteer, Ataru eagerly accepts, and is put into a box. After firing a pistol at the box, Ruu and his assistant then disappear!When nothing happens for a few minutes, Lum and the others rush to the stage. Lum destroys the box, only to reveal Ataru, having taken on the form of a pink hippopotamus!Later on that evening, Sakura and Sakurambo stop by the Moroboshi residence, and upon seeing Ataru, note that the powerful magic they sensed at the Marchenland appears to also be emanating from Ataru as well. However, neither Sakura nor Sakurambo can figure who did this to Ataru, but caution something else may happen.Later that evening, as Lum watches Ataru sleep, a chuckling sound is heard outside Ataru's window. Lum finds it belonging to a clown, who addresses Lum by name! Snapping his fingers, the clown turns into Ruu. Lum confronts Ruu, demanding that he change Ataru back. However, Ruu flies off, leading Lum on a chase through the city and into a hall of mirrors at the Marchenland, where she suddenly sees a vision of herself as a child, before being sucked into a black vortex.When she awakens, Lum finds Ruu's female assistant having transformed into a racoon named O-shima. Ruu also reveals his true self: a young boy (the same as we saw in the future scene in the film's opening). Ruu then reveals that he turned Ataru into a hippo, in hopes that this would cause Lum to leave him. However, when that failed, Ruu led Lum to the alternate dimension they are now in. Ruu then explains that if left alone, Ataru will eventually return to his normal appearance.Lum attempts to escape, but finds herself on a wooden ship in the middle of a crystalline dimension. She attempts to fly out of it, but keeps returning to the ship.Back in the real world, Lum's disappearance has alarmed almost everyone. Shutaro finds information in the form of Kotatsuneko, who saw Lum last headed towards the Marchenland, following a man.Ataru, Shutaro and the others then go to the Marchenland, but find nothing. Megane notes that the place appears much more lackluster than its opening day. Sakura and her uncle arrive, and note that there may have been a dimensional doorway that opened that day, but as it is now, no signs of magical disturbance can be found in the park, except in Ataru's form.As to whom Lum was chasing, some speculate that due to Ataru's lecherous nature, she may have chosen someone else. Ataru laughs this off, claiming he's glad she's gone, but deep inside, he is hurt to consider such a thing.Later that evening, Lum's friends Benten and Ran meet with Ataru, and take him to see another of Lum's friends, Oyuki. The four attempt to figure out who would curse Ataru and take Lum, and eventually contact her parents. Lum's mom suspects one person: the Witch of the Oak Forest.The 4 go to the witch's place, where she explains that 18 years ago, she did place a curse on Lum. Relying on a service called the "Milky Way Curses R Us Management Organization," the witch sent the curse in an orb to them (along with payment), for them to handle the curse. This admittance allows the 4 to prepare to hurt the witch, when she explains that there is more to her story. Eventually, her invitation to Lum's christening did arrive, most likely due to a postal error. Upon seeing that she had been invited, the old witch contacted the organization and had the curse cancelled.Wishing to know more, Ataru and Lum's friends break into the organization, and access the facilities' files. According to one of the staff members, the curse was cancelled by the old witch, but due to a mailing issue, it was lost in transit. However, after checking more information about the curses they handle, the staff member is shocked to find that the curse is still active, and seems much more powerful than any other.Back in the alternate world, Lum talks to O-Shima, who admits that Ruu is lonely, since his parents are away much of the time. O-Shima also admits that just him and Ruu's tutor LaLa are the two he most communicates with. Ruu soon appears and shuts O-Shima up. As he has been playin with the crystal orb for some time, Lum inquires where he got it.Ruu explains that while exploring on his home planet, he found it one evening in a dump. The orb talks to him, and also gives him enhanced powers, including time-travel. He explains that the orb took him back in time and showed him Lum. He was enchanted by her smile, but notes that after she found Ataru, her smile changed.Lum retorts that she still smiles after being with Ataru, but that people can change. Ruu refuses to acknowledge this, and claims that Lum will regain her smile, and Ataru will eventually forget about her.Back in the real world, Lum's friends decide that they have reached a roadblock: they know the curse exists, but have no further information regarding how to find or contact Lum. As Lum is no longer on Earth, they decide to leave. Benten gives Lum's cousin Ten a lift back to his homeworld, while Oyuki retrieves Lum's UFO. Ran also takes leave in her ship.The next segment is chronicled by Shinobu, who notes that Tomobiki-cho's atmosphere has changed with the leaving of Lum and her friends. Eventually, Ataru does return to normal, and assumes his regular girl-chasing tendencies. However, other changes are present. One is that when Lum was around, Shinobu had gained great strength from the inner-jealousy towards Lum. But with Lum gone, Shinobu is now just a normal schoolgirl. Eventually, everyone meets on a hill one starry night, and burn the belongings they have that remind them of Lum, feeling they have moved on.Meanwhile, Ataru has been totally oblivious to this all, and has continued his girl-hunting unabated. One day, he cuts his finger on a Coke can, and notes a red trickle of blood, which suddenly makes him remember the conversation Lum had about the red thread.Ataru then returns home, where he encounters Lala, Ruu's tutor. She explains that she has been following him for some time, and that she needs his help to save Ruu, who has been taken over by the orb's power. Ataru agrees, and using an air-cycle, Lala and Ataru cross dimensions, breaking onto the wooden ship in the crystalline dimension.However, before Lum and Ataru can reunite, the orb sends out a shockwave that throws everyone to the ground, and damages the ship.Ruu regains the orb, and when Lala asks him to destroy it, he refuses, claiming he will make Lum a happy person again. It is then that Lala reveals something a truth that Ruu never knew: Lum is actually a distant ancestor of his. Ruu at one point had said how Lum looked like his mother, and this is the reason why.The orb had lain dormant for over 300 years until Ruu found it, but since it was never cancelled properly by the organization that was handling it, it's power amplified until Ruu found it, and used him to fulfill the curse's purpose of keeping Lum from finding true happiness.As Lum and Ataru awaken, they attempt to embrace the other, but not before the orb sucks them inside itself, planning to keep them separated. Lum swears aloud that she'll find Ataru no matter what.The orb tries to separate the two through various times and places, from fairies to dinosaurs to birds, but the two always find each other, causing the orb to slowly fracture.Finally, Lum finds herself in a cloudy setting, with a red thread tied to her finger. Following it, she finds Ataru, who it appears has multiple threads on his fingers. This causes Lum to zap him, and the orb to fracture, destroying the curse.Eventually, Lala, Ruu and O-Shima return to the future, closing the portal to the present-day.Back in the present, the timeline has returned to just before the opening of the Marchenland, and everyone is talking about it. However, the weirdness and insanity of Lum and her friends plunges the entire class into chaos, before Lum finally declares that everyone of them should go to the Marchenland together when it opens.