Danny Kaye narrates a Danish group-friendly retelling of The Emperor's New Clothes from the perspective of Marmaduke, a smooth-talking yet kindly trickster. The tale opens with a gleam of ambition: a million gold pieces awaits the tailor who crafts the finest clothes for the Emperor Emperor Klockenlocher, a ruler whose vanity becomes the story’s engine. Marmaduke, joined by his loyal sidekick Mufty, senses an opportunity to outsmart the scheming court while keeping the children’s bedtime calm and curious.
Marmaduke soon crosses paths with the Emperor's daughter, Princess Jane Klockenlocher, who warns him about the wicked Jaspar—a jester whose flattering words cloak a more dangerous ambition. Jaspar flatters the vain Emperor with imagined luxury, bending the empire to his will and paying starvation wages to the tailors while amassing wealth for himself. The plot thickens as Marmaduke vows to stop this manipulation, but the Emperor has them exiled to the Boulevard of Rogues to toil away under Jaspar’s shadow.
On the Boulevard, Marmaduke patches up an old suit for the Emperor, and an orphan boy named Busky joins the effort. The trio — Marmaduke, Busky, and Mufty — completes the improvised garment and escapes their harsh surroundings, crossing a perilous moat to reclaim their chance at truth and justice. Inside the palace, Marmaduke tells the Emperor Klockenlocher that he and Mufty have brought a magnificent suit for him, but the Emperor sees only rags and orders them to leave. Marmaduke insists the cloth is enchanted, invisible to those who are foolish or unfit to rule, and pretends to reveal it to the Emperor, who cannot admit he cannot see it.
Jaspar tightens his grip by threatening to have his henchman Ivan fire the cannon at the Boulevard to crush the budding rebellion and seize the prize money. To outwit him, Marmaduke and his friends hatch a plan: Mufty crafts counterfeit coins from brass statues supplied by Jane, while Marmaduke presents the supposed new suit to the Emperor and pockets the prize money in leather sacks. The ruse climaxes as the team hides the fake coins in Ivan’s cannon, though Jaspar urges a stop before the trick is exposed. Eventually, real gold coins end up inside the cannon, complicating the deception and turning the Emperor’s world inside out.
The moment arrives when the Emperor parades to show off his new “garment.” The council gasps at the naked ruler, but Jaspar signals for everyone to applaud as the sham fashion tour reaches its peak. Jaspar then schemes to arrange a marriage between Jane and Marmaduke, but Busky interrupts the procession by laughing and declaring that the Emperor is naked. The council agrees, sealing Jaspar’s downfall and banishing him for letting Marmaduke outwit the throne. Busky delivers a note to the Emperor revealing that Jane and Marmaduke are indeed meant to be together, and the sovereign, recognizing Jane’s love for Marmaduke, leads a town parade toward the Boulevard of Rogues, openly attending the wedding — naked, to the astonishment of all.
As the crowd roars, Jaspar orders Ivan to fire the cannon into the throng, but the blast releases real gold coins that rain down over the grateful poor on the Boulevard. Mufty mourns the misplaced prize money, while Marmaduke shares a celebratory kiss with Jane, bringing a new balance to the kingdom and a hopeful ending for the children listening to the tale.
