Oscar Diggs (James Franco) is an ambitious illusionist/con man employed by a midwestern traveling circus. Despite being greatly ambitious, Oscar's magic career isn't taking off. His illusions are cheap, his suits are torn and patched, and he's barely making enough money to keep his head above water. Frank (Zach Braff), Oscar's circus assistant, barges into Oscar's caravan as he puts the moves on his latest magician's assistant May (Abigail Spencer). He produces a small wooden music box, which he claims once belonged to his great-grandmother, and gives it to May as a token of his love. Frank reminds Oscar, (or Oz, as he's known), that his next show is about to begin. Frank hands Oz the show's cash takings: an old hat filled with a dozen quarters and nickels. Oz reluctantly plucks a pair of coins from the hat and gives them to Frank, and pockets the rest. Frank is unhappy with how Oz treats him.
The magic show begins with Oz striding out onto the stage in a mystical, quasi-oriental robe and turban A young girl in a wheelchair in the front row (Joey King) watches in awe as Oz calls for a volunteer. A dozen hands shoot up, but none belong to May, Oz's assistant and ringer for the show. Oz finally calls May to the stage, much to the bewilderment of the crowd, and she takes the stage. Backstage, Frank produces all of the practical effects for the show: playing music, setting off pyrotechnics, etc. On stage Oz puts May into a deep sleep and causes her unconscious body to float in mid air. An irate voice shouts something from the back: "I see a wire!" Another voice joins in: "Yeah! I see two of 'em!" Bright lights are cast onto the stage, and sure enough, two very visible wires are seen suspending May's body from the ceiling "I want my money back you fraud!" Oz gestures to Frank, who tosses him a scimitar. Oz flicks the scimitar between his hands and then violently cuts the visible wires.... but May remains floating. The crowd gasps and Oz, for the finale, whips the silk sheet off of May's body, revealing empty air. The crowd applauds in unison, and Oz happily accepts the "Bravos!" and "Encores!", and then a small voice cuts through the cheers: "Make me walk!" All goes silent. The little girl in the front row, in the wheelchair, pushes herself toward the stage and repeats her pleas "Please, Wizard. Make me walk!" Oz, caught off guard by the unscripted request, seeks a diplomatic or heartfelt response, but all that comes out is "I'm not that kind of wizard, kid." The crowd turns on him, booing and hissing. Oz, who is now being pelted by popcorn and peanut shells, tells Frank to close the curtains.
Outside, the circus-folk are hurriedly packing up the traveling circus as gray clouds swirl above them. Frank takes Oz aside and tells him that a certain lady-friend is waiting for him in his caravan. He sidesteps the chaos, enters his caravan and is surprised to see a young blonde woman, and not May, waiting for him. This is Annie (Michelle Williams); one of Oz's old romances he met on the road. She's come to see Oz because another man proposed to her and she wanted to tell him first. The pair's chemistry is obvious, but Oz's philandering has ruined anything they might have had. Outside, May watches as another brunette, close to her age, bursts out of a tent holding a music box identical to the one Oz gave her. She swiftly realizes that Oz used her. Seconds later an angry strong-man, the woman's husband, comes bursting out of the tent, hell-bent on tearing Oz a new one. The strong-man crashes through Oz's caravan wall and chases Oz all through the fairground. Oz manages to sneak aboard a readied hot air balloon and escape the clutches of the strong-man. As he soars away Frank throws Oz his hat and magician's bag, filled with his various illusionary instruments. From above Oz watches as all the circus folk fearfully run away, and then he sees it: a massive tornado which is sucking him in. Oz pins himself as tightly as possible into the balloon's basket as the entire contraption is violently whipped back-and-forth inside the tornado.
After nearly being impaled dozens of times, Oz and the balloon escape the violent winds of the twister and emerge in the colorful, widescreen World of Oz. Oz and the balloon luckily avoid hitting the giant mountains surrounding them, but the balloon ultimately crashes, and Oz unceremoniously lands in a shallow river. Oz, bewildered, finds himself surrounded with gigantic sentient plants and small mischievous fairies which peck at his legs. He calls out for help, and through the bushes appears the beautiful and alluring Theodora (Mila Kunis). Theodora answers him and Oz, struck by her beauty, puts on the charm. He tells her that his name is Oz, and she is shocked -- the prophecy foretold that a wizard named Oz (the name of their land) would return to Oz and save them from the Wicked Witch. Oz, jokes that all witches must be green, warted, and must ride a broom, to which Theodora respond