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Synopsis
Max is a lonely child in the suburbs of Austin who creates an imaginary dreamworld named Planet Drool, where all of his dreams come to life. He creates two characters; Sharkboy, who was raised by sharks after losing his father at sea and became a shark-hybrid himself, and Lavagirl, who can produce fire and lava, but has trouble touching objects without setting them alight. The two left Max to guard Planet Drool. In reality, Max's parents have little time for him, and their marriage is not going well. Max is also bullied by fellow schoolmate Linus. However, he does receive friendship from Marissa, the daughter of his teacher Mr. Electricidad. After a chase, Linus steals Max's dream journal and vandalizes it. The next day, as Max attempts to retaliate, twin tornadoes form outside the school. Sharkboy and Lavagirl emerge from the tornadoes and have Max accompany them to Planet Drool, which he learns is turning bad because of Mr. Electric, the dreamworld's now-corrupt electrician.
They confront Mr. Electric, who drops them in the Dream Graveyard, where some of Max's dreams have been dumped. They find Tobor, a robot toy that Max never finished building in the real world after being discouraged by his father. Tobor gives them a lift to other parts of the planet. The three form a friendship during their journey, but they face hardships, such as Sharkboy's anger for the oceans being frozen over, and Lavagirl's desperation to find her true purpose on Planet Drool. They are pursued by Mr. Electric and his "plughounds" across the planet. They plan to visit the Ice Princess and obtain the Crystal Heart, which can freeze time, giving them enough time to get to the center of Planet Drool and fix the dreamworld using Max's daydreaming. However, they are captured by Mr. Electric, and delivered to Linus's Planet Drool incarnation Minus, who has altered the dreamworld with Max's journal, and traps the three in a cage. Sharkboy gets annoyed by Minus and has a "shark frenzy", destroying the cage. After they escape, Max retrieves the dream journal from Minus while he is sleeping. Max informs Sharkboy that his father is alive in his book, but when Lavagirl wishes to learn what it says about her true identity, she burns the book to ash. In rage, Lavagirl asks Max why she is made out of lava, but Sharkboy tells him to let her cool down.
After an encounter with the Ice Guardian, Max, Sharkboy, and Lavagirl reach the Ice Princess, the Planet Drool incarnation of Marissa. She hands over the Crystal Heart, but they are too late to stop the corruption since the ice princess is the only one who can use the Crystal Heart's power, and she cannot leave her home. Mr. Electric fools Sharkboy into jumping into water filled with electric eels, seemingly killing him. Lavagirl also dies after jumping into the water to retrieve Sharkboy. Tobor appears and convinces Max to dream a better and unselfish dream, which in turn revives Sharkboy, who then races Lavagirl to a volcano to revive her. Max concludes that her purpose is as a light against the dark clouds which have engulfed Planet Drool's skies. Max gains reality warping as the Daydreamer and defeats Minus, then offers to make a better dreamworld between the two of them, to which Minus agrees.
Mr. Electric refuses to accept the new dreamworld, and flies to Earth to kill Max while he is dreaming. Max awakens back in his classroom during the tornado storm. Mr. Electric materializes, and Max's parents get sucked into the storm, but are saved by Sharkboy and Lavagirl. Max gives the Crystal Heart to Marissa so she can use the Ice Princess's powers to destroy Mr. Electric. Mr. Electricidad, Linus and Max make peace with one another, and Max reunites with his parents.
Max later informs his class that Planet Drool became a proper dreamworld again, Sharkboy became the King of the Ocean, and Lavagirl became Queen of the Volcanoes, and as the film shows Max finally finishing Tobor, he reminds the class to "dream a better dream, and work to make it real".