Set in the town of Derry, Maine in the year 1960, six-year old Georgie Denbrough is lured to a storm drain when his paper boat drops down into it. When attempting to retrieve it, he encounters a strange yet seemingly friendly man dressed in a clown costume who calls himself "Pennywise the Dancing Clown." The man tempts Georgie closer with promises of cotton candy and balloons, exclaiming that "they all float down" into the sewer. He says that Georgie can "float" too before revealing his true nature, grabbing him and viciously tearing his right arm off. His older brother, Bill, is overwhelmed with guilt for inadvertently sending Georgie to his death and is terrified when his picture comes to life and bleeds.
Bill later befriends several similar "misfits." One is Ben Hanscom, a loyal, determined, overweight and ingenious builder from a home broken after the death of his military father. He is terrorized by visions of both Pennywise and the ghost of his father trying to goad him into the sewer plant. Another is Eddie Kaspbrak, a hypochondriac, asthmatic boy who is frail and shy and lives with his overprotective mother. Kaspbrak is taunted and harassed by Pennywise (who shows a strong dislike towards him for being "girly") while attempting to shower at school.
The group later includes Beverly Marsh, a tomboy with an abusive alcoholic father and a dead eye with a slingshot. She believes Bill's stories when her bathroom is destroyed by a geyser of blood (courtesy of Pennywise) that he helps clean up before her father gets home. Richie Tozier is a comedic red head who isn't afraid to stand up to the school bully, Henry Bowers, and his friends. He is a movie buff, which prompts Pennywise to scare him in the form of awerewolf. Stan Uris, a Jewish boy scout and bird watcher, is the next to have a near-death experience after being trapped by a mummy in an abandoned house. Mike Hanlon, an African American student facing a difficult time as a new student and resident of Derry, often finds himself in the crosshairs of the racist Henry Bowers as well. Mike is last to see Pennywise when his photography book comes to life showing him and the others Pennywise's history as he threatens the group. Though they initially question if Pennywise is simply a deranged man masquerading as a clown, the kids come to the realization that Pennywise is not human at all, so they label him "It."
As each of them face their greatest fears (as well as Henry Bowers's harassment), they vow to avenge the deaths of Georgie and every other child killed by "It." They reason that since Pennywise feeds off of the imagination of its victims that it may likewise be vulnerable to the weaknesses of the forms it assumes. Beverly trains with a slingshot using silver slugs made from a pair of earrings. The Losers travel into the sewers followed by Henry, Victor Criss, and Belch Huggins as payback for a rockfight a month ago. They enter in the main sewer hall and discover Stan is missing, as he had been pulled by Henry and Belch. Henry orders Victor to create an ambush on the remaining Losers, but he gets killed by It. Meanwhile, just when Henry is about to kill Stan, a mysterious light bursts through a sewage pipe and both Stan and Henry watch in horror as Belch is dragged through the pipe and eaten. When the light returns, Stan escapes while Henry stands transfixed turning his hair white. "It" spares Henry's life and continues searching for Stan.
Stan reunites with the others and tells them the "deadlights" are far worse than Pennywise, and they all agree not to stare into the lights. Pennywise catches the Losers and grabs Stan. Just as Pennywise is about to eat Stan, Eddie wounds Pennywise by spraying him with his inhaler which he imagines to be filled with battery acid (after Richie joked that it tasted like the substance) and Beverly cracks open the monster's head with her slingshot, revealing the deadlights. Before she could attack again, Pennywise somersaults in the air and vanishes into a drain in the ground. Before he is completely gone, Bill pulls one of Pennywise's gloves and the glove slips off It's hand, revealing a three-fingered claw; It then disappears in the drain. With their job done, the seven vow to return some day if ever It returns. Meanwhile, Henry escapes the sewers, is arrested and sentenced to life in an asylum for confessing to the murder of all the children and his gang of friends.
Mike had become the only member of the Losers Club to remain in Derry after the events of the early 1960s. His memory of the events are still completely intact, and when he hears of the mysterious, unexplained death of a little girl who is murdered in her back garden (shown in the prologue of Part I), he begins to suspect It has returned. He calls up each of his friends, who have all become successful in their own right. Bill has become a horror novel writer married to a beautiful actress named Audra; Ben has become a famous architect as he'd always wanted; Beverly has become a fashion designer; and Richie has become a late night TV comedian. Eddie owns a successful limousine service and Stan has become a real estate broker. Having moved on into comfortable lives and having barely a glimmer of the memories of that summer, they are all traumatized by the memories awakened by Mike's phone calls. While they agreed to return as promised, Stan is unable to cope with the fear and kills himself, writing the word "IT" on the bathroom wall with his blood.
Upon the return to Derry, their reunion is lighthearted until terrifying events unfold that test their resolve. Beverly encounters a kindly old woman in her old home who tells her that her father is gone, but the woman is more than she appears. Pennywise locates Bill at the cemetery where he is paying a visit to Georgie's grave. There, the clown taunts Bill but the latter makes it known that he remembers him and does not fear him anymore. Pennywise later finds Eddie at the local pharmacy and proceeds to taunt him. Ben sees the skeleton of his father, which is still trying to get him to return to the sewers. Richie encounters Pennywise at the library, who attempts to drive him crazy by creating a rather grotesque illusion of blood-filled balloons before his very eyes (which Pennywise seems to find highly amusing); later, the group's reunion dinner comes to life. Pennywise, unable to kill them because his influence over them as adults is limited, pretends to be Belch's ghost and sends Henry to do the job (after killing the asylum night guard). Henry manages to attack Mike and wound him, which forces Bill and others to consider another direct confrontation with the clown. Eddie and Ben manage to kill Henry in a struggle.
With Henry dead, It is prompted with the task of killing the Losers on its own. Meanwhile, Audra follows Bill to Derry but falls under the influence of It's deadlights and is made catatonic. As the five remaining "Losers" find their way to It's cave, they are greeted by a ghostly image of Pennywise and this time he reveals his truest physical form that the human mind can comprehend: a massive, hideous spider-like creature. In the midst of the battle, Eddie is mortally wounded when he steps forward to save Ben, Richie, and Bill's lives. Once again, Beverly is able to use her slingshot on the creature; this time, the strike rings true and mortally wounds It. Ben, Beverly, Richie and Bill comfort the wounded Eddie, who dies in his friends' arms. In their rage, Ben, Richie, Bill and Beverly slaughter and dismember It, killing it for good. They are able to leave, taking Eddie's body and the catatonic Audra with them. They later bury Eddie in the Derry Cemetery.
In the aftermath, Mike marks his own fading memories of the past as a sign that It was truly destroyed that time, and the adult Losers Club can return to their lives as the memory of the traumatic events fades entirely. Richie gets a part in a movie and he partners up with a man who looks and sounds just like Eddie. Beverly and Ben leave Derry together and head west; one week later they are married and just weeks later Beverly is pregnant. Audra, still catatonic from her encounter, is coaxed back to life aboard Bill's old bicycle "Silver" when he takes her to outrun It's fading influence the same way he did when the bike helped Bill while trying to save a young Stan who was frozen with fear. All as it was, they realize that they can now move on with their lives. As the film fades to black, Pennywise's evil laugh is heard one last time