When the Velveteen Rabbit first arrives in the nursery, he is snubbed by the other toys. But the Rabbit soon makes friends with the Skin Horse who explains how toys can become 'real', if only they are loved enough.

The Velveteen Rabbit longs for this to happen until, one day, he finds that he is Boy's very favourite toy. They play together through a long, golden summer and, even though Rabbit becomes shabbier and shabbier, he becomes 'real' to the boy who loves him so much.

The rabbits in the garden think otherwise - how can Rabbit be real when he can't leap and hop? But when Boy is ill with Scarlet Fever, and Rabbit is thrown away, Rabbit finally discovers what it truly means to be real. As he sheds a tear a magical fairy transforms him into a real, wild rabbit, though her parting words remind him that he was always real to the boy.