In the vibrant streets of Santa Cecilia, young Coco Rivera watches anxiously as her mother, Imelda, struggles to keep their family's traditional zapatería afloat. The once-thriving shoe shop, passed down through generations, faces closure due to mounting debts and competition from cheaper alternatives.
One evening, while exploring the workshop, Coco discovers a group of mischievous duendecillos (house spirits) who have been causing trouble in the neighborhood. These playful creatures, reminiscent of the magical beings from Mexican folklore, possess remarkable craftsmanship skills but love nothing more than creating chaos.
Inspired by her father's old guitar, Coco discovers that music has an extraordinary effect on the duendecillos - it calms their mischief and brings out their innate desire to create. She forms an unlikely friendship with their leader, a particularly skilled spirit named Tlalocito, who shares tales of the ancient artisans who once crafted shoes for the gods.
Together, Coco and the duendecillos devise a plan to save the zapatería. By night, while the town sleeps, the spirits work their magic, crafting exquisite handmade shoes that blend traditional Mexican designs with supernatural precision. Their creations quickly gain attention throughout Santa Cecilia, with customers marveling at the seemingly impossible quality and beauty of the footwear.
However, their success attracts unwanted attention. Señor Malo, a ruthless debt collector from the city, threatens to seize the shop unless the Riveras can pay their mounting debts. His cold calculation and disregard for tradition mirror the darkness of the forgotten souls in the Land of the Dead.
As tensions rise, Coco learns that her ancestors in the Land of the Dead are watching over her efforts. Her great-grandmother appears in visions, teaching her about the sacred balance between tradition and innovation. The duendecillos, sensing Coco's connection to the other side, begin to incorporate elements of Día de los Muertos into their designs, creating shoes that seem to capture the essence of both worlds.
In a climactic confrontation, Señor Malo attempts to shut down the shop during the annual Día de los Muertos celebration. But Coco, armed with her newfound understanding of tradition and magic, rallies the townspeople and the duendecillos. Together, they create a spectacular display of music, dance, and craftsmanship that showcases the true value of preserving traditional arts.
Señor Malo, moved by the community's passion and the beauty of their work, finally understands the worth of cultural heritage over profit. He agrees to restructure the debt, allowing the zapatería to continue its legacy. As the celebration ends and the duendecillos prepare to depart, Tlalocito gifts Coco a small wooden shoe charm, saying "Though we must leave, our spirit remains in every stitch, and our friendship will last until your own children learn to craft shoes."
The story concludes with young Coco, now confident in her ability to preserve family traditions while embracing innovation, looking out upon her thriving workshop. She knows that whenever challenges arise, she can count on both her ancestors' guidance and the mischievous help of her supernatural friends, whose love of music and craftsmanship will forever be woven into the fabric of her family's legacy.