Toni (Heath Ledger) is found hanging under a bridge by Valentina (Lily Cole), Dr. Parnassus' (Chr. Plummer) daughter and Anton, the slight of hand artist of the Imaginarium. Toni doesn't remember who he is or what happened to him, at least in the beginning.
Dr. Parnassus thinks that Toni was sent by Fate to help him win his daughter by means of a new bet with Mr. Nich [the devil]. Toni lures rich women into the Imaginarium and wins their souls. However, four Russian mobsters spot him in a mall and start chasing him. He hides in the Imaginarium and the mobsters follow him. So their souls are claimed by the devil and it is a tide. Toni offers his soul to help Dr. Parnassus. He goes into the Imaginarium with Valentina, where they make love. And here follows the twist: Toni is actually a con man who had set up a charity to help children from developing countries, when in fact he is selling these children's organ to wealthy Westerns. So he is actually the bad guy. Dr. Parnassus makes a deal with the Devil to kill Toni so that he can have his daughter back. He succeeds by tricking Toni with some slight of hand.
At the end, Dr. Parnassus is seen begging on the streets when he sees a woman looking as his daughter, He follows her to a fancy restaurant and sees her with her husband - Anton- and her daughter. He is reunited with his dwarf and ends up selling Imaginarium games made of paper to children.