The plot chronicles the exploits of Michael, a teenager who goes from eating bagels to smoking marijuana and stealing his father's beer. His younger sister, Cory, is worried about him because he started acting differently. When her piggy bank goes missing, her cartoon tie-in toys come to life to help her find it. After discovering it in Michael's room along with his stash of drugs, the various cartoon characters proceed to band together and take him on a fantasy journey to teach him the risks and consequences a life of drug-use can bring.
In Cory's bedroom, an unseen person steals her piggy bank from her dresser. The theft is witnessed by Papa Smurf, who emerges from a Smurfs comic book (along with the other Smurfs) and alerts the other cartoon characters in the room: Garfield as a bedside lamp, ALF from a framed picture, Baby Kermit as an alarm clock, Winnie-the-Pooh as a doll, Alvin and the Chipmunks who emerge from a record sleeve, and finally Slimer, who simply passes through a wall.
The cartoon characters track down the thief and are appalled when they discover that it is Cory's big brother, Michael. Simon opens a box under Michael's bed and identifies its contents as marijuana. Meanwhile, Cory expresses her concerns about Michael's recent change in behavior. He storms out of the house. The cartoon characters quickly realize that something will have to be done about his addiction and that they are the ones to do it and they set off, leaving Pooh behind.
At the arcade, Michael smokes pot with his old "friends" and "Smoke", an anthropomorphic cloud of smoke with a mafioso-like appearance and personality. Afterward, one of the teens shows the group a drug that appears to be Crack, just then what appears to be the cops, show up. Upon being discovered, they run out and are chased into an alleyway by a policeman. Smoke disappears through the wall, telling Michael that, "at times like this, he's on his own". The "policeman" is then revealed to be, in fact, Bugs Bunny wearing a policeman's hat. Bugs traps Smoke in a trash can and uses a time machine (borrowed from Wile E. Coyote) to see when and how Michael's addiction was started—it was discovered that rather than wanting to get started on drugs, he was bullied into doing it by his "friends".
Back at the house, Michael's father notes that two of his beers are missing, but is eventually convinced by Michael's mother, that he drank them last night while watching football. (It is implied that Michael stole them, oblivious to his dad.)
Meanwhile, his mother expresses her concerns about him to Cory and asks her if there is anything wrong, to which she reluctantly replies no. Pooh comes to life soon after, and asks her why she didn't tell her mother about Michael. She explains that if she tells and Michael gets in trouble, she will be the first one he will suspect. Pooh admits that this may happen, but asks her to think about what will happen to Michael if she doesn't tell. She tries to explain things to her father, but this attempt is unsuccessful.
In the park, one of Michael's enemies says that she can buy crack cocaine for ten dollars. He is uncertain of this, but Smoke steals his wallet and tosses it to the enemy, who runs off with it down an alleyway. He gives chase but falls down a manhole with Smoke. There, they are greeted by Michelangelo, Baby Kermit, Baby Piggy and Baby Gonzo.
The Muppet Babies take Michael on a roller-coaster ride through a drug inflicted human brain. When the ride is over, Michael realizes that the brain they just toured is his and that they are currently inside him while he is about to trip over against his feet and fall off a skateboard. The Babies escape from the brain, but Michael and Smoke are left behind.
Michael wakes up at the feet of Huey, Dewey and Louie who, with the other characters, teach him "Wonderful Ways to Say No" through a song.
Michael wakes up in his own bedroom and thinks his whole experience never happened. At that moment, Cory comes into the room and tells him that Pooh wants to know why he never talks to their parents anymore. He tells her to tell Pooh to mind his own business and throws her out of the room. Cory runs off in tears.
Michael instantly regrets his violent behavior. However, Smoke comes out from under the bed and insists that he did the right thing. Michael points out that Cory is his little sister and that he doesn't know what's right anymore. As he stares into a mirror inside his marijuana box, his reflection is replaced with Alf's, who pulls him through the box into a hall of mirrors. Smoke attempts to follow but is left behind.
Inside the Hall of Mirrors, ALF shows Michael his reflection of how he is today, then his reflection if he doesn't stop taking drugs: an aged, corpse-like version of himself (which ALF describes as not Freddy Krueger). When Michael insists that he could quit if he wants to and that he is in charge of his own life, ALF takes him to see 'The Man in Charge' -- Smoke.
Cory and Pooh re-enter Michael's room and find his marijuana box. Smoke appears and tempts her to try the drug. When Pooh tries to persuade her otherwise, he is thrown into a cabinet by Smoke. Cory reasons that if she does what Michael does, then maybe they could have fun together, like they used to before he started doing drugs.
Michael comes to a fortune telling tent and asks the stall tender (who is Daffy Duck) to see his future for him. Daffy at first doesn't realize that he's looking into a bowling ball until Michael points it out, and swaps it for a crystal ball. Daffy's crystal ball shows Michael lying on his death bed, his face even more ravaged than when ALF showed it to him. Michael is horrified by the prospect of this being his future, but Daffy tells him that it can be avoided if he stops taking drugs.
Michael runs out of a nearby door back into his bedroom, just in time to stop Cory from using the drugs herself. He tells her that he never wants to see her taking drugs ever again and admits that he was wrong, though he is unsure if he can change. She advises him to talk about his problems to their parents and to her. Smoke tries to persuade him otherwise, but Michael throws him out of the window, as he feels that he "listened to him long enough". As he lands in a dump truck, Smoke vows to return. Michael sadly admits that Smoke is right, and that he will try to return. Corey agrees but says that "when he gets here we'll be ready for him."
The special ends with Michael and Cory going to tell their parents about his drug problem, while Pooh jumps into a poster on the wall with the other cartoon characters.
The Smurfs were featured in the film. The film also features non–Hanna-Barbera cartoons such as:
- ALF: The Animated Series: Alf
- Garfield and Friends and the television specials: Garfield the Cat
- Alvin and the Chipmunks: Alvin, Simon, Theodore
- The New Adventures of Winnie-the-Pooh and the four featurettes from 1966 until 1983: Winnie-the-Pooh, Tigger
- Jim Henson's Muppet Babies: Baby Kermit, Baby Piggy, Baby Gonzo
- The Real Ghostbusters: Slimer
- Looney Tunes: Bugs Bunny, Daffy Duck (Wile E. Coyote is mentioned but not seen, but his time machine was used by Bugs.)
- Teenage Mutant Ninja Turtles: Michelangelo (Although he appears in the special, he is not shown on the poster or VHS cover.)
- DuckTales: Huey, Dewey and Louie
- Jason Marsden - Michael
- Lindsay Parker - Cory
- Townsend Coleman - Dad, Michelangelo
- Laurie O'Brien - Mom, Baby Piggy
- Joey Dedio - The Dealer
- Georgi Irene - John
- George C. Scott - Smoke
- Jeff Bergman - Bugs Bunny, Daffy Duck
- Frank Welker - Slimer, Hefty Smurf, Baby Kermit
- Lorenzo Music - Garfield
- Danny Goldman - Brainy Smurf
- Don Messick - Papa Smurf
- Russi Taylor - Baby Gonzo, Huey, Dewey, and Louie
- Jim Cummings - Winnie-the-Pooh, Tigger
- Ross Bagdasarian, Jr. - Alvin, Simon
- Janice Karman - Theodore
- Paul Fusco - ALF