Amelia lives with her only son Samuel, who's still afraid of monsters under the bed or in the closet. She proves to him repeatedly there's nothing to be afraid of, but he keeps on making a big deal out of his fear. This adds to hers own stress from the loss of her husband, who had died on the way to the hospital when Amelia was in labor because they got in an accident. One day Amelia tells Sam he can choose a book to read as a bedtime story and he chooses a book called 'Mister Babadook' which scared Sam so much he ended up crying/screaming into Amelia's lap as she read a different book to try and calm him. Amelia later looks at the pages. It says the Babadook will come to a kid in a disguise, demanding him to let it in, then asks the same to the kids mother, and then it'll get rid of it's disguise and haunt them, but the last pages are empty. Amelia then hides the book from Sam, but as the days go on, Sam gets more terrified about The Babadook, so Amelia tears the Babadooks images from the book and tosses them all in the garbage.
Afterwards, Samuel starts to blame The Babadook for his mischiefs. Amelia feels he's only making it up until she starts to feel weird things. One day the front door is knocked on and there's nobody there when Amelia opens it. The knocking continues and when Amelia opens the door again, she finds the book with the torn pages glued back into it. Also the empty pages are filled with images of the Babadook shadowing the mother, and her killing her son. Amelia then burns the book but she gets more paranoid and stressed as weirder things happen to the point that it makes Amelia afraid to sleep. She then stays up for two nights in a row. But as Samuel asks for her motherly care, Amelia has episodes of sudden anger outbursts with her voice changing at times. The second night, she catches Sam calling their old Parkinsonian neighbor Mrs. Roach.
Amelia dismisses her, but continues her rage by killing their dog and then chasing after Samuel. She catches up to him but he knocks her out by throwing something hard at her. Amelia wakes up tied with Sam refusing to leave her. Her episodes make her choke Sam as he gets near to hug her, but her inner self wins as Sam strokes her cheek. Amelia then vomits something black and Sam says that she's free, but then Sam tells her she can't make the Babadook go away, and Sam is dragged away by an invisible force. She confronts the force, arguing that it's trespassing her house. The Babadook manifests itself as a shadow but runs away to the basement when Amelia doesn't run from it. Things seem to go back to normal afterwards and as Amelia and Sam prepare Sam's seventh birthday party-which was never celebrated due to the fact that it is the same day as the death of Sam's father. Amelia collects worms and maggots then brings them to feed something in the basement.