Alex and Jeff Mattingly are father and son who have moved out to a remote cabin in the woods. Jeff is a lonely little boy who is not entirely happy about his situation, since he has no one his age. One day he discovers a new friend, Mike, in the woods near his home. They have a great time exploring the woods and playing together. However, Jeff has problems relating to any of the other children and no one believes "Mike" exists. Alex prohibits Jeff from playing with Mike, after it appears that Mike tried to kill him. One day, when Alex catches up with Mike out in the woods, he realizes that Mike was an imaginary friend from his own childhood.
After a fight with some of the other kids, Jeff runs out to find Mike in the woods. This time Mike tells him that he does not want to be his friend anymore. Alex finds Jeff and tells him to apologize to the other kids; then he finds Mike and they both say goodbye.