A baby that everyone in the village found to be the most precious falls terribly ill one winter. Her father took her to see an enchantress, who removed the illness but left a power within the girl. As she grew older, people in the village went to the girl because she had premonitions of the future. But she used her power to kill people, including her father. The child was taken into the woods to be left alone, but she lured other children to a grim fate.
After their father's death, teenage Gretel (Sophia Lillis) and her younger brother Hansel (Sam Leakey) are going to meet a man about a job as a housekeeper. Gretel meets with the man, but he makes his true intentions clear when he asks Gretel if she is still a virgin; the two leave without a job. At night, the siblings' mother rebukes Gretel for not doing what she had to do to get a job and help provide for them. She tells Gretel that she and Hansel must leave because there is no room left in the house, threatening to hack Gretel to bits if they don't leave immediately. The siblings flee their home and find a hut to sleep in for the night.
Suddenly, a ghoulish man arises and lets out a horrible scream and chases the siblings outside, attacking Hansel. Before he can get to Gretel, he is killed with an arrow to the head from a hunter (Charles Babalola), who takes the siblings into his home for the night and directs them toward others who can provide them with food and work. The following morning, the siblings go outside to forage and seek work. They get frustrated when they find nothing until Gretel spots some mushrooms. They turn out to be hallucinogenic mushrooms that cause the two to laugh hysterically. Hansel then wanders until he finds a house that has a cake smell coming from it. Gretel follows as she hears what sounds like a girl's voice beckoning her, seen alongside "the Beautiful Child" being taken away in a carriage. Gretel tries to stop Hansel from going inside, but he goes anyway and appears to be taken by someone. Gretel tries to start a fire to break inside, but she is greeted by Holda (Alice Krige), the woman living inside. She invites the siblings inside for a meal and allows them to sleep there in exchange for work.
Holda has Hansel go out into the woods to practice his skills with an axe, while she keeps Gretel at the house. Hansel enjoys his time there because they have plenty of food, but Gretel becomes suspicious of Holda's intentions. Gretel starts to see a vision of the Enchantress and hears children's voices guiding her somewhere, but before she finds out what's going on, she wakes up in her bed. While Hansel goes out, Holda shows Gretel how to tap into her powers as a witch. Gretel goes into the woods and manages to use her power to bring a tree branch near her so she can take fruit from it. Meanwhile, Hansel also sees a vision of the Enchantress and spots an inverted pentagram carved on a nearby tree. Hansel starts to grow suspicious of Holda. Later in the night, Gretel makes her way into Holda's cellar where Hansel is sitting in a trance. Suddenly, the floor fills with goo, and a younger witch emerges, emptying buckets of guts onto the table before turning them into the same food that Holda fed the siblings. The next day, as Gretel sits with Holda while she is eating, she sees her pull a long strand of a child's hair out of her mouth. Gretel pleads with Holda to let Hansel go, but she refuses.
Through a series of visions, she tells Gretel the truth about the story of the Beautiful Child: Holda was the girl's mother, and because she resented her daughter for killing her father, she abandoned the girl in the woods. However, the child lingered in Holda's mind, promising to share her powers with her if she trusted the darkness. Holda devoured her other children and took on the guise of an old woman to appear friendly and lure children to their fates. Holda straps Gretel to a table in the cellar as she assumes her youthful appearance to lure Hansel into a cage so she can cook him. Gretel manages to use her powers to move a staff toward Holda, pinning it on her neck towards the wall over the flames. Her body catches fire and she dies, breaking the trance on Hansel and setting Gretel free. Gretel decides to stay behind at the house while sending Hansel on his way with a horse. The horse brings him back to the family's old house, with their mother now gone. Gretel sees the spirits of the dead children emerge from the trees, now free at last. Her fingers start to turn black just like Holda's did as she stated in a voiceover that she will be brave and trust in herself.
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