In The Imaginarium of Doctor Parnassus, director Terry Gilliam takes us on a journey with a traveling theatre group, led by the once immortal Doctor Parnassus. The group travels along the streets of England with a magical mirror, which once entered by a spectator, allows them to explore their imagination and make a choice between enlightenment and pure ignorance.
One night the group incidentally stumbles upon a man hanging from a bridge, and rescue him. This hanging man (Heath Ledger) has a golden pipe in his windpipe, which he spits out when the theatre group struggles to bring him back to life. Parnassus, a firm believer that there is no such thing as coincidence, decides that the hanging man who has no recollection of his past, was sent to them for a particular reason. Parnassus uses his powers to look into the man's mind and finds out that he was once a philanthropist by the name of Tony.
Tony joins the group as a barker, bringing lots of money and curiosity to the traveling show, something that they have never experienced. He suggests to Parnassus that the show on wheels is outdated, and must become more contemporary to lower suspicions about the legitimacy of the Doctor's operation. In his troubled past, Parnassus has made several bets with the devil, known in the film as Mr. Nick, which has brought him to his miserable place in life.
Mr. Nick comes to Parnassus with another bet, this time suggesting that whomever can capture five souls first through the power of the mirror. Those who choose enlightenment's souls go to Parnassus, while those who choose ignorance souls go to Mr. Nick. The wager of the bet is Parnassus' daughter, Valentina (Lily Cole). The Imaginarium of Doctor Parnassus takes on the transformation recommended by Tony, and becomes quite the delightful experience for those who happened to be graced by it's presence, and it looked certain that Parnassus was going to be the victor. The woman whom the first won soul belongs, heads into the mirror, not knowing what to expect.
Tony follows her through the mirror, and takes on a different appearance. (Johnny Depp) The woman becomes more than enlightened, and is so thrilled by what she saw that she writes a blank check to the doctor. After seeing the expression on the woman's face, several other women race to the stage to be the next to experience the absolute joy of opening their imagination to it's fullest. Parnassus has now managed to win three souls. During another show, four Russian gangsters spot Tony, who had owed money to the men in his troubled past, and chase him through the mirror into the imaginarium.
Parnassus tries to enlighten these men, by tempting them with a song in an attempt to recruit them as police officers, where they would be legally obliged to beat on people. Mr. Nick tempts the men with a large Babushka, and manages to capture all four of their souls. Feeling defeated, Parnassus decides to inform Valentina of his previous exchange with the devil, where he was granted youth so long as he gives up his first daughter when she turns 16. Valentina becomes upset, and wants to run away from the group.
Tony, knowing what was about to happen to her, decides to give his soul to Parnassus. Anton, a member of the theatre group, discovers that Tony was once a charity scammer, and begins to scuffle with him. During the struggle, all three of them fall through the mirror and end up in the imaginarium. Tony and Valentina begin their journey in a boat together, but the setting suddenly changes to Tony as a philanthropist at a fundraising event. Anton takes the shape of a young boy and makes everybody in attendance aware of Tony's fraudulant ways, and Tony is chased by an angry mob to the top of Mount Parnassus only to discover another noose.
Mr. Nick decides he wants to trade Valentina in exchange for Tony, and Parnassus approaches Tony with two versions of his golden pipe, one of them not being genuine. Tony chooses the wrong pipe, and dies, his soul going to Mr. Nick while Valentina is freed. Years later Parnassus exits the imaginarium to find that Valentina and Anton have married and had a child. Parnassus continues to put on his shows, but only as a toy theatre to avoid any more encounters with Mr. Nick.