The next morning, Hansel and Gretel still lie fast asleep in the forest when they are visited by another gentle spirit: the Dew Fairy, whose task is to awaken children and welcome the day. After the spirit departs, Gretel stirs, enchanted by the sounds and beauty of the morning forest. She wakes Hansel, and the siblings share their dreams—discovering with wonder that they both dreamed the same vivid vision of the protective forest spirits. 

Just then, the forest reveals its greatest secret: a house made entirely of sweets. Captivated, Hansel and Gretel approach. Finding no one nearby, and driven by hunger, they eagerly begin to nibble pieces from its candy walls. 

But the house is not empty. From within emerges the Witch, who at first feigns warmth, coaxing the children to stay while subtly ensuring they cannot escape. When the children attempt to flee, she raises her wand and freezes them in place. Hansel is forced into a cage while Gretel, bound by fear and her love for her brother, is compelled to remain. The Witch sets Gretel to work fetching food, intent on fattening Hansel. 

While Gretel is inside the house and Hansel feigns sleep, the Witch reveals her true plan: Gretel will be tricked into tending the fire in the great oven, only to be pushed inside by the Witch and baked into gingerbread. Hansel, once plump enough, will be the main course to the appetizer of Gretel. 

Overcome with glee, she calls upon her broom that soars through the sky while she revels in her schemes. 

The Witch returns to Hansel, frustrated that he hasn’t fatten up enough. She then turns her attention to fulfilling her plan for Gretel by asking the child to tend the fire in the great stove. But Gretel is warned by Hansel and pretends to be confused at what the Witch wants her to do. While the Witch goes to the fire to show Gretel what she wants, Gretel takes the wand the Witch has laid down and frees Hansel from his cage. She and Hansel then creep over to the Witch, who is leaning into the fire, and push her in. 

The children rejoice at being free from their captor but suddenly the stove lights up and everything goes dark around them. The Witch’s spell over the other children she has captured through the years has been broken, and the gingerbread statues around the house suddenly turn back into children. Hansel and Gretel touch the children, fully freeing them from the spell and everyone rejoices. The father and mother appear and rejoice at finding their children. The other woodland spirits join the children, as do the Sandman and Dew Fairy and everyone celebrates the happy ending.