Tom, a poor orphan, is employed by the villainous chimney-sweep, Grimes, to climb up inside flues to clear away the soot. While engaged in this dreadful task, he loses his way and emerges in the bedroom of Ellie, the young daughter of the house who mistakes him for a thief. He runs away, and, hot and bothered, he slips into a cooling stream, falls fast asleep, and becomes a water baby.

In this new life, he meets all sorts of aquatic creatures, including an engaging old lobster, other water babies, and at last reaches St Branden's Isle where he encounters the fierce Mrs Bedonbyasyoudid and the motherly Mrs Doasyouwouldbedoneby. After a long and arduous quest to the Other-end-of-Nowhere young Tom achieves his heart's desire.