Upon discovery that the Empress is dying, Atreyu the boy warrior, is summoned to find a cure. The Empress gives the AURYN to To Atreyu, a powerful medallion that protects him from all harm. At the advice of the giant turtle, Morla the Aged One, Atreyu sets off in search of an invisible oracle known as Uyulala, who may know the Empress's cure. In reaching her, he is aided by a luckdragon named Falkor, whom he rescues from the monster 'Ygramul the Many'. By Uyulala, he is told the only thing that can save the Empress is a new name given to her by a human child, who can only be found beyond Fantastica's borders.
As Falkor and Atreyu search for the borders of Fantastica, Atreyu is flung from Falkor's back in a confrontation with the four Wind Giants and loses AURYN in the sea. Atreyu lands in the ruins of Spook City, the home of various wicked creatures. Injured by the fall and stranded in the dangerous city, Atreyu finds the wolf G'mork, chained and near death, who tells him that all the residents of the city have leapt voluntarily into The Nothing. There, thanks to the irresistible pull of the destructive phenomenon, they have become lies in the human world. The wolf also reveals that he is a servant of The Manipulators, the force behind The Nothing. They wish to prevent the Empress's chosen hero from saving her. G'mork then reveals that when the princess of the city discovered his treachery against the Empress, she imprisoned him and left him to starve to death. When Atreyu announces that he is the hero G'mork has sought, the wolf laughs and succumbs to death. However, upon being approached, G'mork's body instinctively seizes Atreyu's leg in his jaws. Meanwhile, Falkor retrieves AURYN from the sea and arrives in time to save Atreyu from the rapid approach of The Nothing.
Falkor and Atreyu return to the Childlike Empress, who assures them they have brought her rescuer to her—Bastian. But, Bastian decides to take over Fantastica for himself, and yet he is stopped by Atreyu, whom Bastian grievously wounds in battle.
Atreyu was played by 11-year-old Noah Hathaway in the first film and by Kenny Morrison in the sequel. The makeup team on The Neverending Story planned to paint Noah Hathaway green just as Atreyu is in the book, but the effect didn't work, so they went without it. Hathaway later said "It wasn't believable. I looked like fungi!"