[2] The story begins on a tiny island called Morrowland (original German: Lummerland, a play on Nimmerland [de], the German translation of Neverland), which has just enough space for a small palace, a train station and rails all around the island, a grocery store, a small house, a king, two subjects, a locomotive named Emma, and a locomotive engineer by the name of Luke (Lukas) (who, as railway civil servant, is not a subject).

They convert Emma into a makeshift ship and sail off the island in the night, eventually arriving at the coast of Mandala (a fictional country inspired by China).

Jim and Luke free Princess Li Si[4] and a large number of children, who had all been kidnapped and sold to Mrs. Grindtooth by a gang of pirates (the Wild 13).

Following the events in Jim Button and Luke the Engine Driver, life in Morrowland continues as usual for a year until the postman rams New-Morrowland with his mail boat in the dark of night.

In addition, Sursulapitschi is distressed because her fiancée, a "Schildnöck" (turtle merman) named Ushaurischuum, has been assigned by her father to refashion the Crystal of Eternity, a task only possible with the aid of a creature of fire, with whom the merpeople are at war.

Using the special properties of the cliffs' material, Jim and Luke convert Emma into a flying vehicle which they dub the "Perpetumobile" due to its unlimited means of locomotion.

To their surprise, in the desert they also encounter their half-dragon friend Nepomuk, who had had to flee the Dragon City following the events in the first book, for his help in capturing Mrs. Grindtooth.

With the help of the Emperor, Jim and Luke – and Princess Li Si as a stowaway – start their journey to meet the Wild 13 and rescue Molly.

Molly is lost at sea, and all but Jim are captured and brought to the pirates' base, Castle Stormeye, a pinnacle of rock within the eye of a perpetual hurricane.

As it turns out, Jim is the last descendant of Caspar, the third of the Three Kings, whose heirs were doomed to remain homeless after Mrs. Grindtooth had sunk their kingdom beneath the ocean millennia ago.

In the end, the Wild 13 sacrifice their fortress, Jim's old kingdom reappears – and to everyone's surprise, Morrowland turns out to be located at the top of the realm's highest mountain.

China is still an empire, Native American Indians and Eskimos still live in traditional ways, yet there are ocean liners, telephones, a postal service, chewing gum and other modern conveniences.

Some locations are based on real places, such as the Himalayas, and legendary ones, such as the magnetic cliffs in the Voyages of Sinbad the Sailor and a beautiful abandoned city under the sea, patterned after Atlantis.

As the Frankfurter Allgemeine Zeitung wrote, children read Jim Button at a time in their lives when "the existence of dragons is as real as dinosaurs and kings [are] closer than the chancellor".

That Ende's book was full of Nazi symbols and imagery turned on their head, and that its English references stemmed from his interest in Darwin was unknown until late 2008, when Julia Voss, a German journalist, published an article in the Frankfurter Allgemeine Zeitung revealing the story's background.

Voss identified numerous literary references in the book, some which reverse the Nazi indoctrination of Ende's youth and others, which stem from his interest in Darwin and draw on English culture and history.

Darwin describes Button's character and demeanor[5] and relates details about his capture and sale, explaining his unusual name, and about his return to his homeland, two years later.

"[5] Voss explains that subjects like German, history and geography took a back seat to biology, where the need for racial purity was drummed into pupils on official order.

Quoting from Nazi literature, Voss writes, "no boy or girl should leave school without having been led to the ultimate cognition of the imperative need [for] and essence of racial purity."

Ende's school in Sorrowland is run by a dragon who has a skull on her door, reminding of Heinrich Himmler's Totenkopfverbände,[6] and she terrorizes the children with a baton and teaches them lessons on eugenics and racial purity.

"[3][6][note 4] Ende spent the summer of 1943 visiting his grandparents in Hamburg, when the allies' serial bombing raids,[6] caused firestorms and damage so catastrophic, the Nazis furloughed 2,000 prisoners for two months.

[5] Sun Koh, the hero of a science fiction series, complains in a story from 1935 that the races were not kept pure, except in Germany, where a methodical racial policy was breeding the Nordic roots again.

[5] Koh says, "If our Atlantis once again rises out of the sea, then we will get from there the blond, steel-hard men with the pure blood and will create with them the master race, which will finally rule the earth.

Early in his first book, Ende writes, "Lokomotiven haben zwar keinen großen Verstand – deshalb brauchen sie ja auch immer einen Führer".

[14] A dramatized audio book, Jim Knopf und Lukas der Lokomotivführer (Fontana/Deutsche Grammophon) was narrated and directed by Ende himself.