In October 1988, Bill Denbrough crafts a paper sailboat for Georgie, his six-year-old brother. Georgie sails the boat along the rainy streets of small town Derry, Maine, only to have it fall down a storm drain. As he attempts to retrieve it, Georgie sees a clown in the drain, who introduces himself as "Pennywise the Dancing Clown". Pennywise entices Georgie to come closer, then bites his arm off and drags him into the sewer. The following summer, Bill and his friends Richie Tozier, Eddie Kaspbrak, and Stan Uris run afoul of older bully Henry Bowers and his gang. Bill, still haunted by Georgie's disappearance, calculates that his brother's body may have washed up in a marshy wasteland called the Barrens. He recruits his friends to investigate, believing Georgie may still be alive. Ben Hanscom, one of Bill's new classmates, learns that the town has been plagued by unexplained tragedies and child disappearances for centuries. Targeted by Bowers' gang, Ben flees into the Barrens and meets Bill's group. They find the sneaker of a missing girl named Betty Ripsom, while a member of the Bowers Gang, Patrick Hockstetter, is killed by Pennywise while searching the sewers for Ben.

Beverly Marsh, a girl bullied over rumors of promiscuity, also joins the group; both Bill and Ben develop feelings for her. Later, the group befriends orphan Mike Hanlon after defending him from Bowers. Each member of the group has encountered terrifying manifestations of the same menacing clown who attacked Georgie: a headless undead boy, a sink that spews blood only children can see, a diseased and rotting leper, a disturbing painting come to life, Mike's parents burning alive, and a frightening phantom of Georgie. Now calling themselves "The Losers Club", they realize they are all being stalked by the same entity, which they refer to as "It". They determine that It assumes the appearance of what they fear most, awakening every 27 years to feed on the children of Derry before returning to hibernation, and moves about by using the sewer lines, which all lead to an old stone well hidden under an abandoned house. After another attack by Pennywise, the group ventures to the house to confront It, only to be separated and terrorized. As Pennywise gloats to Bill about Georgie, the Losers regroup and Beverly impales Pennywise through the head, forcing the clown to retreat. The group flees the house and begins to splinter, with only Bill and Beverly resolute in fighting It.

Weeks later, after Beverly confronts and incapacitates her sexually abusive father, she is abducted by Pennywise. The Losers Club reassembles and travels back to the abandoned house to rescue her. Bowers, who has murdered his abusive father after being driven insane by It, attacks the group; Mike fights back and pushes Bowers down the well to his apparent death. The Losers descend into the sewers and find It's underground lair, which contains a mountain of decayed circus props and children's belongings, around which the bodies of It's child victims float in mid-air. Beverly, now catatonic after being exposed to bright lights inside It's gaping mouth, is restored to consciousness when Ben kisses her. Bill encounters Georgie, but recognizes that he is It in disguise. As Pennywise, It takes Bill hostage, offering to spare the others and go into hibernation if they let It feed on Bill. The Losers reject this, battling with It while overcoming their various fears. It is eventually defeated and retreats deeper into the sewers, with Bill declaring that It will starve during its hibernation. Finding the remnants of Georgie's raincoat, Bill finally comes to terms with his brother's death and is comforted by his friends.

As summer ends, Beverly informs the group of a vision she had while catatonic, where she saw them fighting It again as adults. The Losers swear a blood oath that they will return to Derry as adults if It returns. After the others make their goodbyes and disperse, Beverly and Bill discuss her leaving the next day to live with her aunt in Portland. Before she leaves, Bill reveals his feelings and they kiss.