The story begins with an old, childless couple who live alone. The elderly woman wishes for a child, even though she's old. Eventually, a son was born to them, but their son was only an inch (2.5 centimetres) tall. They named the miniature child Issun-bōshi. The old couple takes good care of him even though he is small. One day, Issun finds out he will never grow, so he goes on a trip to seek his place in the world. He thinks he might become a good warrior, so Issun-bōshi is given a sewing needle for a sword, a soup bowl for a boat, and chopsticks for oars.
He sails down river to the city, where he asks for a job with the government and goes to the home of a rich daimyo (lord), whose daughter is an attractive princess. They say no because he is so tiny, but give him a job entertaining the princess. While they travel together, they are attacked by a big monster that swallows Issun-boshi. The boy defeats the monster by pricking him from within with his needle/sword. The monster spits out Issun-boshi and drops a magical Uchide's Mallet as he runs away. As a reward for his bravery, the princess uses the power of the mallet to make him grow. Issun-bōshi and the princess stay friends and get married later.