In 1950s Japan, university professor Tatsuo Kusakabe and his two daughters, Satsuki and Mei, move into an old house to be closer to the hospital where the girls' mother, Yasuko, is recovering from a long-term illness. The house is inhabited by tiny creatures called susuwatari?small, dark, dust-like house spirits seen when moving from light to dark places.[note 1] When the girls become comfortable in their new house, the soot spirits leave to find another empty house.

One day, Mei discovers two small spirits who lead her into the hollow of a large camphor tree. She befriends a larger spirit, which identifies itself by a series of roars that she interprets as "Totoro". She falls asleep atop Totoro, but when Satsuki finds her, she is on the ground. Despite many attempts, Mei is unable to show her family Totoro's tree. Tatsuo comforts her by telling her that Totoro will reveal himself when he wants to.

One rainy night, the girls are waiting for Tatsuo's bus, which is late. Mei falls asleep on Satsuki's back, and Totoro appears beside them, allowing Satsuki to see him for the first time. Totoro has only a leaf on his head for protection against the rain, so Satsuki offers him the umbrella she had taken for her father. Delighted, he gives her a bundle of nuts and seeds in return. A giant, bus-shaped cat halts at the stop, and Totoro boards it and leaves. Shortly after, Tatsuo's bus arrives.

A few days after planting the seeds, the girls awaken at midnight to find Totoro and his colleagues engaged in a ceremonial dance around the planted seeds and join in, causing the seeds to grow into an enormous tree. Totoro takes the girls for a ride on a magical flying top. In the morning, the tree is gone but the seeds have indeed sprouted; it is left unclear whether the girls were dreaming.

The girls find out that a planned visit by Yasuko has to be postponed because of a setback in her treatment. Mei does not take this well and argues with Satsuki, later leaving for the hospital to bring fresh corn to Yasuko. Her disappearance prompts Satsuki and the neighbors to search for her. Desperately, Satsuki returns to the camphor tree and pleads for Totoro's help. Delighted to help, he summons the Catbus, which carries her to where the lost Mei sits and the sisters emotionally reunite. The bus then whisks them over the countryside to see Yasuko in the hospital. The girls overhear a conversation between their parents and discover that she has been kept in hospital by a minor cold but is otherwise doing well. They secretly leave the ear of corn on the windowsill, where their parents discover it, and return home.

Eventually, Yasuko returns home, and the sisters play with other children, while Totoro and his friends watch them from afar.

https://en.wikipedia.org/wiki/My_Neighbor_Totoro
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