Jared's explorations of the house lead him to stumble upon a locked trunk which, unsurprisingly, is opened by the key. Inside, he finds Arthur Spiderwick's Field Guide to the Fantastical World Around You, a sealed leather-bound book that once belonged to his great, great uncle Spiderwick (Jason Strathairn). A hand-written warning ("Do not read this book for fear of death") proves to be no deterrent for the inquisitive Jared who breaks the seal and, like Pandora's Box, unleashes a multitude of evils on the family. The book represents Spiderwick's life, not just his life's work: in it he chronicled in detail all the unseen faeries, goblins, trolls, ogres, and sprites that populated his garden but it was his refusal to destroy the book that led to his departure from this world.

It is soon revealed that the creature responsible for pilfering small items and squirreling them behind the walls is an irate "boggart," or a brownie turned bad, called Thimbletack who, when infuriated, expands like a balloon and turns a sludgy shade of green but when pacified with honey on crackers, deflates into a cute and affable mole-like creature. Upon discovering the field guide has been removed from its place of safekeeping, Thimbletack becomes violently green and round. For with the knowledge contained in the book, Mulgarath (voiced by and for a brief moment appears in the form of Nick Nolte), an evil shape-shifting creature with serpentastic amber eyes, can fulfill his sole desire to rule not only the faerie world but to also conquer all mortals. Only with a "seeing stone" or a copious dollop of spit in the eye from the bird-eating hobgolin Hogsqueal (voiced by Seth Rogen) can humans see Mulgarath's invisible tribe of toad-like goblins. Armed only with salt and tomato sauce (two products that inexplicably repel and burn the creatures) the children do all they can to fend off the attacking goblins, which — when they realize that the book has been brought out from its safe place — immediately set upon trying to traverse across the protective ring of toadstools that protect the house.