Kate DiCamillo's The Magician's Elephant begins with an introduction to a troubled orphan boy named Peter Augustus Duchene, who is in the care of his guardian in the fictional town of Baltese. One day, Peter is sent on an errand. But instead of going on that errand, Peter sees a tent offering up the services of a fortune teller who will answer any question for a florin (a currency associated with the Italian city of Florence). He goes into the tent, opting not to buy food so that he can hopefully - finally - find out what happened to his sister.
The fortune teller tells Peter that he must "follow the elephant" to find his sister, but this perplexes him until he sees a magician who is able to make an elephant appear (despite only wanting to conjure up a bouquet of lilies).
Peter continues to live his life, but has an interesting dream: while being trained by Lutz in the art of being a soldier, a little baby girl arrives in her bed. After thinking the matter over for some time, Peter deduces that the baby is his sister, Adele. Meanwhile, Adele, who is living at the Orphanage of the Sisters of Perpetual Light, begins to experience strange, vivid dreams after her brother's previous incident with an elephant. In fact, Adele dreams of the elephant coming to the door of the orphanage to ask for Adele.
Eventually, Peter learns that Adele is alive and well. But his friend Lutz, who is training Peter to become a soldier, is unable to adopt her because she is too old. Still, Peter decides to speak with the elephant to determine how he can reunite with his sister. But when Peter sees the elephant, he notices how disheartened the elephant is and promises to help the elephant escape its harsh conditions. With the help of the magician that initially conjured the elephant, Peter helps the elephant disappear - but not before he is reunited with his sister, who he warmly embraces.
