Ashley Black (Sarah Wayne) and her teenage brother Joshua (Joshua Jackson) go to spend the summer with their divorced father Jack (Mark Harmon), a psychiatrist and radio host, in a cabin by a lake in British Columbia. The lake is popular with tourists due to rumors of a creature named Orky who resembles the Loch Ness Monster. Jack discovers a support group of locals, lead by psychiatrist Dr. Wanda Bell (Harley Jane Kozak), who all believe that Orky has inhabited their bodies. After Jack himself is briefly inhabited by Orky, Ashley and Joshua try to befriend the monster and find out why it's possessing people.
Magic in the Water contains examples of:
- An Arm and a Leg: Two dock workers are both missing an arm — one right, the other left — which they claim is because of an attack by Orky, who'd leapt out of the lake between the pair one night.
- As Himself: Orky gets this credit.
- "Begone" Bribe: Jack gives Ashley and Joshua each a $100 bill to get them out of the way while he attends a support group meeting. Ashley protests, "Dad, this is-" but Joshua drags her away before Jack has time to change his mind.
- Catch a Falling Star: Ashley is trying to climb a rope ladder into a tree house when two of the rungs break. Orky possesses Jack and uses him to run to where she is and catch her. He falls and hits his head on a rock, causing a mild concussion, but Ashley is unharmed.
- Digging to China: Ashley and her father Jack start digging such a hole while playing on the beach, much to her brother Josh's scorn. Later in the movie, Hiro falls into the hole while running along the beach, and Josh walks out of the beach house just in time to see him climb out. Cut to Josh digging in the hole, expecting to find a tunnel to China (apparently not considering the possibility that the kid was already in town). Later, Jack is seen digging in the hole, apparently expecting to find the kids — which kinda works since he ends up digging through to the sea monster Orky's cave, where Ashley, Josh and Hiro have already discovered it. Since Jack was possessed by Orky earlier in the movie, it's likely this was why he was digging in that spot to begin with.
- Disney Death: Poor Orky apparently dies from the toxins dumped in the lake, but at the very end, he leaves a sign that he's still alive by eating the fillings out of another batch of Oreos that Ashley left for him... and is then shown possessing Wanda Bell, letting her swim in the lake in his body.
- Drowning Pit: Averted but the Orky sub almost becomes this when Ashley, Josh and Hiro become trapped inside and it sinks.
- Foreshadowing: Josh climbs up to a treehouse, using a rope ladder with twigs for rungs, the rungs nearly buckle under his weight and finally give way when Ashley tries to climb the ladder after running away. This leads to the Catch a Falling Star moment mentioned above.
- Inkblot Test: Wendy shows Jack a piece of paper and asks what he sees. Jack says that he sees thousands of children and that one of them is missing, and asks Wendy, "Did you draw this yourself? Because this is really good." The paper only shows a single tiny ink dot.
- Little Stowaway: The kids hide in the Orky submarine while Joe drives it.
- Madness Mantra: One member of the support group repeatedly mutters, "I don't believe in monsters, 'cause monsters don't exist. It didn't inhabit my body, I didn't become a fish."
- Married to the Job: At first, Jack largely ignores Joshua and Ashley so he can spend time on the phone or doing research, even though, as his ex-wife points out, he hasn't spent any quality time with the kids since last summer. He starts spending more time with them after his possession.
- Not Now, Kiddo: At first, no one believes Ashley that Orky is real. When she says he's been eating her Oreos, Jack thinks she lost them and says, "Don't worry about it, honey. I'll get you some more."
- The Runaway: Ashley overhears Jack saying on the phone to her mom, "I took them on this stupid vacation, didn't I? What more do you want?" Hurt, she runs away. After an attempt at hitchhiking, she tries to climb into the tree house, not knowing that people are searching the rocks for her a short distance away. This leads to Jack's possession.
- "Scooby-Doo" Hoax: Invoked. The people who dump toxic waste into the lake build a submarine that looks like Orky and bribe Joe, who sells Orky merch, to drive the submarine up to his dock and "confess" to faking all the sightings for money. If no one thinks Orky lives in the lake, they'll face less opposition for harming the environment.
- Shock Jock: Jack isn't as offensive as some examples, but he does insult almost every caller.
- Single Specimen Species: Orky appears to be one of a kind and his Maybe Magic, Maybe Mundane nature seems to imply he is The Ageless.
- Stock Ness Monster: Ashley Black and her father and brother visit a Canadian town called Glenorky, "Home of Orky". Though her brother dismisses it as nonsense, it turns out Orky is very real, vaguely resembles a plesiosaurus (albeit with a much thicker, more manatee-like head and neck, rather than a serpentine one) and has the power to temporarily switch bodies with humans, leaving them with memories of swimming in the lake and physical markings on their body. Unfortunately, a couple of men are dumping toxins in the lake to try and kill him after he supposedly leapt out of the water between them and took an arm off each of them years ago. There's also a fake monster built by the pair to travel around in the lake and fake sightings of Orky.
- Synchronization: Jack and the other members of the support group develop a rash and become increasingly ill because of toxic pollution making Orky sick.
- That Cloud Looks Like...: Jack, Joshua, and Ashley lie on the beach by the lake, watching clouds. Jack sees Christopher Columbus's three ships, Joshua sees the Energizer bunny, and Ashley sees smoke signals.
- That Was Not a Dream: Jack spends most of the movie adamant that his experience with Orky was a dream.
- Trademark Favorite Food: Ashley consumes huge amounts of Oreos. She befriends Orky by leaving some on the dock for him, and discovers the next morning that he somehow ate the cream filling but left the cookies. At the end of the film, she leaves another batch on the dock, and when she and Hiro find the fillings missing the next morning, it's taken as proof that he's still alive.
- Two Words: I Can't Count: On the phone, Jack says, "Two words, Al. Re lax!"
- Vertigo Effect: Used at the very end of the movie. Ashley thinks Orky is dead, but she leaves some Oreos at the end of the dock anyway. The next morning, she finds that someone has eaten the filling but left the wafers on the dock, just like Orky used to. The effect is used when she screams with excitement.
- Voluntary Shapeshifting: According to legend, Orky has evaded capture due to his ability to transform into anything, including a human.
- Writer's Block: Jack is trying to write a book. He spends most of his time staring at a Word document that contains only the words "Chapter 1."
