Londoners Zanna and Deeba are twelve years old and spend most of their time together. They have noticed that lately some strange things are going on, almost all of them seeming to focus on Zanna. For example, Zanna and her friends are attacked by a very dark cloud, which leads Zanna to spend the night at Deeba's house in an attempt to avoid whatever it is that is looking for her.
Deeba wakes up in the middle of the night to find that an umbrella has been moved noisily by spies in her home. They cannot see the spies but they can see the umbrella moving and so the girls follow it; it leads them down some steps into the basement of a building where they are pulled through a gap in the wall that leads them away from real life London, and into Un-London - or Un Lun Dun as referenced in the novel's title.
UnLondon is a strange, Alice in Wonderland kind of place that mirrors real life London. It is filled with animated objects that Londoners have thoughtlessly thrown away. They are saved from a rather aggressive moving trashpile by another real Londoner named Hemi but he is sent away by Obaday Fing, who is a tailor. He tells the girls that rather than being their friend, and another real Londoner drawn into this strange, nonsensical mirroring world, Hemi is a ghost, and is trying to get close to them so that he can possess one of them.
As he talks to the girls, Fing begins to realize that Zanna is the Chosen One - the prophet Shwazzy who's destiny it is to save UnLondon from the evil smog cloud that is closing in on it. He tells Zanna that it is her calling to save them all, and he takes the girls to meet his friends. Together they visit the Propheseers so that they can learn more about the Smog. They learn that it was created in London, and a group of weather witches called the Armets did battle with it, using a magic weapon called the Klinneract, but the Smog turns out to be a far harder to kill adversary than they had anticipated. The Smog travelled to UnLondon, awaiting the arrival of the Shwazzy, who, it is written, will one day come to UnLondon herself to save it from the evil cloud of pollution.
Although it is prophesied that Zanna will overpower the Smog, her first battle does not go as planned. In fact, it is somewhat of an epic failure. Brokkenbroll, the master of broken umbrellas, shoos the Smog away using a new and as-yet-untested technique. Zanna is injured badly and is sent home with Deeba after her memories of UnLondon have been erased from her mind. The UnLondoners turn to Brokkenbroll to free them from the Smog, which he does by manufacturing and handing out new umbrellas that will help defend against the cloud.
Although Zanna's memories of UnLondon have been wiped, Deeba's have not. She starts looking it up on the internet, hoping to find someone else who has been there, or some kind of online support group of people who have experienced UnLondon for themselves. She does find references to the things and the people they discovered in UnLondon, but not in the way they were introduced to them. For example, Unstible, Brokenbroll's friend and fellow inventor, had been reported dead, but he was in fact not dead at all, but immersed in his study of the Clean Air Act - which UnLondoners had mis-heard as "Klinneract". Deeba decides that she wants to return to UnLondon, which she manages to do after several unsuccessful attempts.
She finds herself in Wraithtown, city of ghosts, where she locates Hemi and verifies Unstible's passing. She sets out to warn the propheseers, but she and Hemi are captured along the way by Brokenboll's henchment, who take them to him. They learn that he has been in cahoots with the Smog all along, and that he has re-animated Unstible's body. They manage to escape but when they warn the Propheseers, they are not believed. They have no choice other than to escape them as well, taking The Book with them as they run. The Book agrees to help them fulfill all of the things that the Shwazzy is destined to do, and defeat the Smog; however, Deeba has only a tiny window of time in which to accomplish this because if she stays in UnLondon too long, the people of London itself will forget all about her. They are assisted by the friends they made on Deeba's first visit, including Obaday, Yorick Cavea and Curdle the Milk Carton. They pick up UnGun, a weapon that can be loaded with anything at all, in case they run out of actual ammunition. Deeba turns out to be a sharp shooter; she defeats the Smog, saves UnLondon, and is given the name of "The UnChosen One."
