Dr. Lao [Tony Randall] rides a golden donkey into the small town of Abalone, Arizona, and visits Edward Cunningham [John Ericson]’s newspaper to place a large advertisement for his traveling circus, which will perform for two nights only.
Though quiet, Abalone is not peaceful. Wealthy rancher Clinton Stark [Frank Cady] has inside information that a railroad is coming to town and plans to buy the entire town while the land is cheap. Stark arrives at the newspaper offices to confront Cunningham about a recent editorial opposing Stark’s plan, while Lao, waiting to place his ad, silently listens.
Another opponent is Angela Benedict [Barbara Eden], a widow librarian and schoolteacher. Cunningham displays affection for her, embarrassing her in a visit to the library to research Lao’s background, but she suppresses her reciprocal feelings.
At a town hall meeting, Stark announces that the town’s 16-mile-long water-supply pipe is decaying and that a replacement would be prohibitively expensive. He offers to buy the entire town. Arguing against the offer, Cunningham introduces George G. George [Eddie Little Sky], a Navajo Indian who lives nearby in a town whose residents depend on Abalone’s existence. Stark reluctantly allows the townspeople to ponder their choice until the next Friday night.
The next day, Cunningham confronts Lao at the circus site, arguing that Lao’s hometown vanished centuries earlier. The mysterious Lao deflects Cunningham’s questions. Later, Angela’s young son Mike Benedict [Kevin Tate] learns that Lao is 7,321 years old. When the circus opens, Lao uses his many faces to offer his wisdom, including those of Pan [Tony Randall] (the god of joy), the Great Serpent, Medusa and Merlin.
Mike visits Lao seeking a job, displaying his novice juggling and conjuring skills. Lao instead offers observations in the form of a poetic speech about the world, and life, as a circus.
It is learned that on the first night of the circus, Stark’s henchmen destroyed the newspaper office. Angela is kept awake that night, plagued by the music that Pan played while no one else could hear it.
At dawn, the newspapermen are astonished to discover that their office has been fully restored with the press operating. Attributing it to Lao, they rush to produce a short edition of the paper, which Cunningham delivers to Stark in the morning. When he visits the circus site, Lao offers encouragement and calls on Cunningham to keep faith.
That evening, Lao stages his grand finale, a magic lantern show depicting the story of a once-happy kingdom of Woldercan, destroyed by the pettiness and greed of its inhabitants. The Abalone townspeople are at first delighted to see themselves represented in the vision, then chastened as it progresses toward the end of the mythical civilization in explosions and darkness. The townspeople find themselves again in the library in a town meeting. A vote is called on Stark’s proposal, and to the surprise of Cunningham, Benedict and Stark, it is rejected unanimously. Stark tells everyone about the coming railroad and Angela confesses her love to Cunningham.
Stark’s henchmen are confused by his apparent change of character and trash Lao’s circus in a drunken spree, during which they break Dr. Lao’s fishbowl. The fish inside it is revealed to be the Loch Ness Monster, which balloons to enormous size when exposed to the open air. After it chases the two thugs away, Dr. Lao conjures rain to wet the monster and shrink it to its original size.
Morning comes and the circus is gone, with only a red circle on the desert floor where the tent had been. At first Mike’s reports of the previous night are disbelieved, but Stark finds the hat belonging to one of the henchmen. Mike chases a dust plume that seems to him to be the spirit of Dr. Lao. He stops to find three wooden balls, seemingly left for him, which he juggles expertly while summoning the spirit of Lao to observe.
Dr. Lao rides away as his advice from two nights earlier is repeated, reminding Mike that the circus of Dr. Lao is life itself, and that everything within it is a wonder.
