The film is set in a world where a person's soul resides outside their body in an animal-like form called a Dæmon. A dictator-like organization called the Magisterium exercises power in the secular world. Lyra Belacqua, an orphan of Jordan College along with her dæmon Pantalaimon (nicknamed Pan), spins tales of the Gobblers, who she and her friends believe are snatching children.
Forced to hide in a closet, Lyra learns that her uncle Lord Asriel is about to present a proposal to the master and scholars of Jordan College. She watches as a Magisterium official pours powder into a flask of her uncle's favorite Tokaji|Tokay wine. Left alone in the room, Asriel pours a glass of Tokay, but Lyra rushes out and knocks the glass out of his hand. Asriel later presents evidence that particles called "Dust (His Dark Materials)|Dust" exist. Over the objections of the Magisterium, the college funds Asriel's expedition to the far north to investigate the Dust. He believes it originates in a parallel universe and enters a person's body via their dæmon. The Magisterium has secretly been experimenting on children to discover a way to inoculate them against its influences.
At dinner Lyra meets Marisa Coulter|Mrs. Coulter, who insists on taking Lyra north as her assistant. Before Lyra leaves, the master of the college entrusts her with the only remaining Objects of His Dark Materials#Alethiometer|alethiometer (the film's titular Golden Compass). This device, he tells her, reveals the truth. The Magisterium has destroyed all the others; he warns her to tell no one she has it. Lyra accepts the gift, promising to keep it hidden.
At Mrs. Coulter's house, Lyra mentions 'space dust'. Mrs. Coulter warns her never to mention it again. Lyra refuses to remove her shoulder bag because it holds the golden compass. Mrs. Coulter's dæmon attacks Pan, causing Lyra to give in. After hiding the compass under her pillow, Lyra and Pan search Mrs. Coulter's secret room, where they discover that Mrs. Coulter is head of the General Oblation Board, the "Gobblers", who have been kidnapping local children. She also discovers that her best friend Characters of His Dark Materials#Roger Parslow|Roger and her Races and creatures in His Dark Materials#Gyptians|Gyptian friend Billy have been taken by the Gobblers.
Hearing Mrs. Coulter call out for her, Lyra and Pan meet her in a hallway. Running to her bedroom, they see Mrs. Coulter's dæmon holding the alethiometer. Changing into a hawk, Pan swoops down, grabs the golden compass, and flies out an open window. Lyra escapes behind him, slamming the window on Mrs. Coulter's dæmon. The "Gobblers" pursue her, but she is saved by some Gyptians. Aboard a Gyptian boat heading north to rescue their children, Lyra shows the alethiometer to a Gyptian wise man, Farder Coram, who advises her in its use. On deck that night Serafina Pekkala, the witch queen, tells Lyra that the missing children are in a place called Bolvangar ? a place shunned by all living things. Mrs. Coulter sends two mechanical spy flies after Lyra and Pan; one is batted away but the other is caught and sealed in a tin can by Farder Coram, who explains that the spy fly has a sting with a sleeping poison.
At a Norwegian port, Lyra is befriended by a cowboy aeronaut named Lee Scoresby, who advises her to hire an Races and creatures in His Dark Materials#Armoured Bears (panserbjørne)|armoured bear. Exiled in shame, the giant polar bear Characters of His Dark Materials#Iorek Byrnison|Iorek Byrnison has been tricked out of his armour by the local townspeople, for whom he now performs menial jobs for buckets of whisky. Using the alethiometer Lyra tells Iorek where to find his armour. Armoured again, the fearsome Iorek and his friend Lee Scoresby join the trek northward.
That night while riding on Iorek's back, Lyra finds a cowering Billy separated from his dæmon. Lyra reunites Billy with his mother just as the group is attacked by Samoyedic peoples|Samoyeds who capture Lyra. Taken to the armoured bear king Ragnar, Lyra tricks him into fighting Iorek one on one. After killing Ragnar, King Iorek carries Lyra near Bolvangar, to a thin ice bridge. Reaching the station, Lyra is taken to eat with the missing children. While hiding again Lyra discovers that the Magisterium scientists, under the guidance of Mrs. Coulter, are performing experiments to sever the bond between a child and their dæmon. Caught spying, Lyra and Pan are thrown in the separation chamber, causing them to scream in agony. Mrs. Coulter rescues Lyra and takes her and Pan to her quarters.
When Lyra wakes up she is comforted by Mrs. Coulter, who tells Lyra that she is her mother. Lyra then guesses that Lord Asriel is her father. When Mrs. Coulter asks for the compass, Lyra gives her the can containing the spy fly. The spy fly stings Mrs. Coulter, knocking her and her daemon out. Lyra runs to the room with the separation machine and toggles the switches and dials wide open. The growing chain reaction builds as Lyra yanks a control box loose and hurls it into the separation machine, causing it to explode. This sets off a series of explosions that tear the facility apart. As alarms whoop, Mrs. Coulter is found and carried outside.
Outside, the children are attacked by Tartar mercenaries and their wolf dæmons. The battle is joined by Iorek, the Gyptians, and a band of flying witches. The Tartars are defeated and the children are rescued. Rather than returning south, Lyra, Roger and Iorek fly north with Lee Scoresby in search of Lord Asriel.
Unaware that he is in mortal danger, Lord Asriel has set up a laboratory to investigate the glowing Dust from another world, but Lyra is certain that, once she delivers the alethiometer to her father, the two of them will be able to make things right.
[Plot summary provided by WikiPedia]