In feudal Japan, 12-year-old Kubo tends to his mother Sariatu, earning their living by magically manipulating origami with music from his shamisen for the nearby villagers. He tells the tale of his deceased father Hanzo, a samurai warrior, but is never able to finish his story as he does not know how Hanzo died, and his mother herself cannot recall as her mental state deteriorates. Sariatu warns Kubo not to stay out after dark as her sisters, Karasu and Washi, and his estranged grandfather the Moon King, who took Kubo's eye when he was a baby, will find him and take his remaining eye.

At the village's Bon Festival, where the townsfolk can speak to deceased loved ones, Kubo is angry when Hanzo does not appear, and forgets to return home before sunset. Karasu and Washi attack him, but Sariatu fights them off by magically strumming the dropped shamisen. Using her magic to animate the stag beetle pattern on the back of Kubo's robe, it sprouts wings to fly him far away and tells him to find his father's armor. Kubo reaches desperately out to her, but only accidentally pulls a single strand of hair in his hand.

Kubo awakens in a distant blizzard to find Monkey, his wooden Japanese macaque charm, has come to life; she sounds oddly similar to Sariatu. Guiding him to shelter inside the corpse of a whale, Monkey tells Kubo that Sariatu is gone, used the last of her magic to save him and bring Monkey back to life, and the village has been destroyed. Seeing Sariatu's hair strand, she twists it into a simple braid and ties it around Kubo's wrist as a bracelet in her memory. With the help of "Little Hanzo", an origami figure based on Hanzo, they set out to find the armor, and meet Beetle, an amnesiac samurai cursed to take the form of a stag beetle who believes himself to have been Hanzo's apprentice.

Kubo, Monkey, and Beetle find the "Sword Unbreakable" in the Hall of Bones, and defeat a Gashadokuro to escape with the sword. Crossing the Long Lake in a leaf boat to locate the "Breastplate Impenetrable" deep underwater, Kubo and Beetle swim down and encounter a sea monster, the "Garden of Eyes", which entrances victims with its many eyes. Kubo is caught in the creature's sight, and realizes that Monkey is the reincarnated spirit of his mother. Beetle rescues Kubo and retrieves the Breastplate, and they return to the boat to find Monkey has been wounded fighting and killing Karasu.

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