The movie kicks off with a charming ensemble of birds involved in an organization known as 'The Feathered Friends.' The central focus of their discussion revolves around Big Bird, a character they believe should be relocated to a family of birds, given his status as an orphan. Hence, they appoint their representative, Miss Finch, to assist Big Bird in finding a new home.
Upon her arrival on Sesame Street, Miss Finch successfully persuades Big Bird that joining a bird family is in his best interest. This decision leads to a heart-wrenching farewell for Big Bird and his friends, who have come to see themselves as his true family. Shortly thereafter, Big Bird finds himself in Ocean View, Illinois, where he is introduced to his new avian relatives, the Do-Do's. Although he attempts to fit in with them, Big Bird can't shake off the feeling of homesickness that lingers in his heart.
One day, Big Bird receives a large postcard from Mr. Snuffleupagus, expressing his desire to visit. However, the Do-Do's scoff at the idea that Big Bird could have friends outside of their kind, which deeply hurts him. Upset by their dismissiveness, Big Bird decides to embark on a journey back to Sesame Street to reunite with his true friends.
The news of Big Bird's ill-fated 'flight' travels through a television broadcast, catching the attention of his friends who resolve to take action. They set off on an adventurous quest, utilizing both cars and planes in their search for him. Along his journey, Big Bird grows weary from walking and unexpectedly hitches a ride with a friendly turkey farmer. Eventually, he arrives at a nurturing farm, forging a bond with a couple of children. They spend a cozy night together in the barn, but the following day, his world shakes again as Miss Finch makes an appearance, prompting Big Bird to run away once more.
Big Bird's travels lead him to a town called Toadstool, but he soon realizes that Miss Finch is hot on his trail. To evade capture, he finds himself on the outskirts of the town, where he encounters two shady characters known as the Sleaze Brothers. These brothers claim they can hide him from Miss Finch, but Big Bird quickly discovers that he has fallen into their trap. They scheme to turn him into a spectacle, painting him blue and marketing him as 'The Bluebird of Happiness.' Despite the upbeat title, Big Bird's heart-wrenching performance speaks to his true longing for home and the company of his friends.
After the show, when two children find him backstage, Big Bird passionately explains that they should contact Sesame Street to let them know where he can be found. The next day, his loyal friends courageously infiltrate the circus tent to rescue him. However, as the Sleaze Brothers attempt to make their getaway, Gordon and Olivia spring into action, ultimately facilitating Big Bird’s release just before the brothers are apprehended for a slew of illegal activities.
In a heartwarming climax, Big Bird returns to Sesame Street to thunderous cheers from his friends. Yet, a shadow looms over this joyful reunion when Miss Finch reappears, expressing her intentions to relocate him with another bird family. Maria passionately defends Big Bird, championing the diversity and happiness found within their community on Sesame Street, a place where difference is celebrated rather than shunned. Moved by her words and the lengths to which his friends went to rescue him, Miss Finch ultimately concedes that Big Bird can remain where he is happiest.
Finally back in his cozy nest, Big Bird greets Mr. Snuffleupagus, who had been waiting patiently for his return, signifying the end of an arduous journey and the triumph of love and friendship where they truly belong.
