Haroun, the title character and protagonist, is the lonely only child in his family. While he is generally a happy boy, he finds his surroundings to be sad and depressing. He helps his father bring joy to the community by accompanying him when he goes out to tell his stories. When his mother leaves, Haroun becomes as sad and inconsolable as the city around him. He begins to suffer from a short attention span and can't concentrate on anything for longer than eleven minutes. In an attempt to save his family, Haroun journeys to the Second Hidden Moon of Earth to connect with the Ocean of the Streams of Story. Along the way, his bravery and resourcefulness help restore balance to that world and to his family.

Rashid, Haroun's father, is a master storyteller. He is known throughout the community for his gift of weaving tales together and inventing creative characters to entertain and bring joy to all those who will listen. However, he appears to be blind to his own troubles. When his wife becomes despondent and stops singing, Rashid carries on as if nothing is wrong. It is not until she leaves the family that he becomes depressed and loses his ability to spin his stories.

Haroun's mother, Soraya, was once known for her near constant singing of beautiful songs. However, early in the story, she becomes fed up with her husband's imagination and leaves him for the dull clerk who lives upstairs. This results in the family crisis that her son sets out to rectify.

Mr. Sengupta is the unimaginative clerk who runs off with Soraya. He abhors anything creative. He appears on the Second Secret Moon as Khattam-Shud, the arch villain who must be defeated in order to restore the balance of imagination.

Blabbermouth is a girl who has disguised herself as a boy in order to serve as a Page in the Guppee Library, or army. She is as brave as she is talkative, and Haroun seems to develop feelings for her over the course of the story.

Mudra, a fearsome Chupwala warrior who communicates not in words but in the language of gestures, is the commander of Khattum-Shud's forces. Eventually, he becomes disillusioned with his cause and joins the Guppee army.

The water genie Iff is one of Haroun's companions throughout his adventure. Speaking mainly in synonyms, this blue mustached genie comes off as a bit grumpy but usually very enthusiastic.

Mali is a Floating Gardener, composed of plant matter, who travels alongside Haroun, Butt, and Iff. Quieter than most inhabitants of Gup, he plays a significant part in the defeat of Khattam-Shud.

Butt, a giant mechanical bird, serves as Haroun's transportation. He is capable of telepathy and can fly at speeds greater than anything Haroun could ever have imagined.

Prince Bolo is the eager and enthusiastic leader of Princess Batcheat's rescue party. What he lacks in intelligence he makes up for in bravado.

Snooty Buttoo is the crooked politician who employs Rashid to win over voters for his reelection campaign.