In their run-down tenement, Hansel and Gretel endure their daily chores. Both are starving, and Gretel chides Hansel for his complaining. Putting their work aside, they begin to dance, but their mother, Gertrude, enters and scolds them for their dalliance. A jug of milk is broken, and she is infuriated with her naughty children, sending them out of the house in search of food. Gertrude despairs over the family’s current economic condition. The unemployed father, Peter, enters happily with unexpected provisions. He is shocked to discover that the children are wandering near the carnival, a dangerous place full of mischief and intrigue.
As they wander idly, Hansel praises himself for finding nourishment. Absentmindedly, both children eat everything and then realize how this will anger their mother. A mysterious darkening mist envelops the children. The Sandman appears and prepares them for sleep. As they become drowsy, they say their evening prayers.
When morning breaks, the Dew Fairy awakens Hansel and Gretel. They both discover that they have had the same dream about angels descending to earth. The two children find themselves in front of the carnival, replete with sweets and an eerie carousel of inanimate children. They begin to nibble on the sugary treats. The carousel is really a trap, revealing the home of the Witch. She offers her friendship, but both children are suspicious. The Witch casts a spell to immobilize them.
The evil sorceress stokes the stove’s fire, intending to cook both children. Gretel manages to break the spell, and she and Hansel shove the Witch into the oven and slam the door shut. A curse is lifted, and other children resume human form. Hansel and Gretel are reunited with their parents while the dead Witch is dragged out of the oven.