In 1943, dollmaker Samuel Mullins and his wife Esther live happily in rural California with their young daughter Annabelle, affectionately nicknamed "Bee." Tragically, Bee is struck and killed by a passing car after a tire blows out on their way home from church. Desperate in their grief, Samuel and Esther pray to any entity that will allow them to see their daughter again. An entity responds, initially appearing as Bee's sweet spirit and asking permission to move into a limited-edition porcelain doll Samuel crafted. The parents agree, only to realize too late that they invited a malevolent demon looking for a human host. After Esther is viciously attacked and blinded in one eye, the Mullins lock the doll inside Bee's closet, wallpapering the interior with pages from the Bible and having Catholic priests bless the entire house.

Twelve years later in 1955, the Mullins open their home to Sister Charlotte and six displaced orphan girls whose shelter closed down. Janice, an orphan girl walking with a leg brace due to polio, is assigned to share a bedroom with her best friend Linda. Despite Samuel warning the girls never to enter Bee's locked bedroom, Janice is drawn to the door late at night by mysterious notes reading "Find Me." Inside, she finds the bedroom miraculously unlocked and opens the Bible-plastered closet, unwittingly releasing the trapped demon.

The demonic presence begins systematically terrorizing the orphans, focusing its attention on the vulnerable Janice. One afternoon, the entity pulls Janice into an outdoor barn, taking the form of a rotting spirit that lifts her high into the air and drops her, permanently crippling her legs and leaving her confined to a wheelchair. When Janice tries to explain what happened, nobody believes her until Sister Charlotte speaks with Esther Mullins, who reveals the tragic truth behind the doll and her own disfigured face.

The demon launches a full assault to possess Janice completely. Taking her form in the wheelchair, the entity snaps Samuel's fingers and crushes his face before moving on to Esther, ripping her body in half and nailing her to the wall. The possessed Janice stalks the remaining orphans through the house with unnatural, contorting strength. Sister Charlotte and Linda manage to trap the possessed Janice and the porcelain doll back inside the Bible-lined closet.

When police arrive the next morning, they discover the bedroom wall torn open from the inside. Janice has escaped into the surrounding fields, leaving only the deactivated porcelain doll sitting silently inside the closet.

Police confiscate the empty porcelain doll, and Sister Charlotte departs with the surviving girls. Meanwhile, the possessed Janice flees to an orphanage in Santa Monica, introducing herself under the name "Annabelle."

Years later, a loving couple named the Higgins family visits the orphanage and adopts young Annabelle. The film jumps forward twelve years to 1967. A grown-up Annabelle, now a murderous member of a Satanic cult alongside her boyfriend, breaks into her adoptive parents' home next door to the Form family, brutally slaughtering them. The scene ends at the exact opening frame of the 2014 Annabelle film, bringing the origin story full circle.