Allen Bauer (tom hanks), a nine years old kid, does not know how to swim but when he sees something in the sea at Cape Cod, he dives in the ocean not realizing that he could even die. That beautiful thing turns out to be a mermaid. The mermaid figures that the boy has no swimming skills and hence rescues him and takes him to the shore. The kid has fallen in love with the mermaid and so has the mermaid. But they have to part.