The Blue Fairy next appears after has locked Pinocchio in a cage; the showman intends to use the wooden boy to make an enormous amount of money. Ashamed of doing the wrong thing, Pinocchio attempts to hide when he sees the wishing star approaching the , though both he and Jiminy are spotted. The Blue Fairy asks Pinocchio why he did not attend school; lying, he replies that he was kidnapped by two monsters, who put him into a sack and threatened to chop him into firewood. As his lie grows, his nose becomes longer until it resembles a tree limb, complete with bird's nest. The Blue Fairy informs him that "a lie keeps growing and growing, until it's as plain as the nose on your face". When Pinocchio promises to tell the truth from now on, the Blue Fairy returns his nose to normal and frees him from the cage with a tap of her wand.
The wishing star is first referred to in the film's (with the Blue Fairy herself perhaps referred to in the song as ). When Jiminy Cricket begins his story, the wishing star is looking over , and it, and the other stars, are 'shining like diamonds'. It is not mentioned again in the film until, inside . After has opened the window, Geppetto notices the Wishing Star, and prays that the marionette Pinocchio become a real boy. Everyone in the workshop falls asleep; soon, however, Jiminy is woken by an ethereal glow caused by the star as it moves closer and closer to the window. Eventually, the Blue Fairy herself appears in the workshop, stating that Geppetto deserves his wish after the happiness he has brought to others. She walks to Pinocchio and, tapping the puppet with her wand, grants him life. She tells him that he must learn the difference between right and wrong in order to become a real boy. When Pinocchio appears not to understand, Jiminy interrupts to explain, and the Blue Fairy offers him the position of conscience to Pinocchio. Somewhat dumbstruck by her beauty, he agrees, and is granted a new suit befitting his status. The Blue Fairy then leaves, reminding Pinocchio to "be a good boy, and always let your conscience be your guide."
| Enchanted Forest|
Blue Fairy | Tinker Bell | Nova | Fairy Godmother
Mother Superior | Astrid | Tinker Bell
After the two return home and see Geppetto's abandoned workshop, the Blue Fairy, in the form of a dove, drops a message that Geppetto learned about Pleasure Island and set sail in order to rescue Pinocchio, but his boat was swallowed by . Presumably, this "bonus help" was due to the fact that Pinocchio had gotten back on track by listening to Jiminy (as well as ceasing his bad boy behavior unlike ) and that Jiminy would not have realized that Geppetto had been attacked by Monstro as they were making their way back to the village. Pinocchio's dangerous decision to try and rescue Geppetto (even over Jiminy's objections) was the final test in order to see whether or not he had what it takes to become a real boy.
Jack Campbell's animation of the Blue Fairy closely followed live-action footage of Marge Champion (who was also the performance model for ) under the direction of Hamilton Luske. Oskar Fischinger, a famous abstract filmmaker from Germany who had been hired by Disney primarily to help with 's abstract Toccata and Fugue in D Minor segment, was responsible for animation of the Blue Fairy's magic, including the effects surrounding her when she first enters the workshop and the beams of light emanating from her wand.