How It All Goes Down
Kendra and Seth's parents are making them stay with their reclusive grandparents while they go on a cruise. Rough deal, right? As Kendra and Seth settle in with Grandpa Sorenson (Grandma is mysteriously absent), they learn that there are a lot of rules. We're talking stay in the house or garden, no going into the forest or barn—stuff like that.
Seth heads for the forest as soon as he gets the chance to slip out (hey—wasn't he just told not to?), and meets an old woman who seems like a witch. Kendra tries to solve the mystery of three tiny keys her grandfather has given her, and she ends up unlocking a journal that has the hidden message Drink the milk. When the kids drink the milk that's placed around the gardens, they can suddenly see that all the butterflies and dragonflies, which have been acting kinda strange, are actually mini-humans with wings—they're fairies.
Grandpa has a serious convo with the kids about how this land is a preserve for magic creatures called Fablehaven. Now that they're in on the secret, they get to meet a fairy trapper, Maddox, and a golem (a magical construct that obeys orders), Hugo—and it turns out that the housekeeper, Lena, is a former naiad. Seth runs afoul of the fairies and is transformed into a mutant walrus-human hybrid, and so Grandpa must ask a favor of the witch, Muriel, to undo the curse. This leaves Muriel bound by only one knot, which is bad news.
Midsummer Eve arrives. It's a time when the magic critters (both the benevolent and the not-so-nice ones) can run free around the preserve, and Grandpa instructs the kids to stay upstairs in their room, earplugs in, circles of salt around their beds; looking out the windows is totally forbidden. Seth, of course, looks out a window—and is tricked into opening it, letting all kinds of dark magic critters in. Kendra and Seth manage to make it back to one of the salt-encircled beds in the havoc, keeping their pet chicken, Goldilocks, safe too—but by morning, Grandpa and Lena have disappeared, and their cousin Dale has been turned into a statue.
The kids set off to try to find Grandpa and Lena. They strike out, only managing to annoy some satyrs and an ogress, and they discover that the forbidden barn has a giant cow in it that desperately needs to be milked. It's a gross and difficult task, but they manage—and then they see a message written in the feed grain for the chicken: Goldilocks is their grandma. Say what? They bring her to Muriel to disenchant, thereby releasing Muriel from her final knot, after which she disappears.
Grandma takes the kids to a troll to try to find out Grandpa's whereabouts. Turns out Grandpa's in the basement of the Forgotten Chapel, so they gather up weapons and set off. Muriel is there too, assembling an army of imps and releasing the demon Bahumat, who will plunge the preserve into darkness.
Muriel captures Grandma and Seth, but can't touch Kendra, since she hasn't committed mischief or done magic, which leaves her invulnerable according to the magic laws of the preserve. Kendra runs off, and in an act of desperation, asks for help from the Fairy Queen—and the Fairy Queen gives her the ability to assemble an army of human-sized fairies, who go and kick butt.
The fairies release Grandma, Grandpa, and Seth, and turn Dale back to a human—they take Lena back to the naiad pond though, erasing her human memory. Bahumat is bound once more, with Muriel bound to him as well, and the Forgotten Chapel is sunk underground and replaced with a hill covered in wildflowers. Then the fairies return to their usual size.
Things go back to normal, except that Kendra can see magic critters without having to drink the magic cow's milk daily, like most humans do. Grandma and Grandpa tell Kendra and Seth to come back, since they're considering passing Fablehaven on to them when they get older; then the kids' parents pick them up post-cruise, and off they go, back to the normal world.