In 1990, Kyle Walsh, an antisocial teenager befriended by Caitlin Greene (Emily Browning), loses his last baby tooth. That night, he wakes after a horrific nightmare and senses Matilda's presence, discovering that the story is true. Knowing she cannot bear the light, he shines a flashlight into her face and flees, hiding in the brightly lit bathroom. His mother tries to reassure him that there is nobody else in the house, but is killed after seeing Matilda in Kyle's room. The next morning, police arrive and Kyle is removed to a psychiatric institution after mistaken speculations that he killed his mother.