At Dream Castle, the playful ponies frolic through vibrant meadows and lush green fields alongside their animal friends. Meanwhile, Baby Lickety-Split is perfecting a new dance routine, with the help of her companion, Spike the baby dragon, who is there to play the piano for her practice. However, not far away, at the Volcano of Gloom, an evil witch named Hydra concocts a plot to sabotage the ponies' festival. Her two inept daughters, Reeka and Draggle, do not meet the wicked expectations of their mother, prompting her to send them off on a mission to cause chaos during the festival.
During an important dance performance, Baby Lickety-Split's attempt to introduce her own moves results in a disaster, drawing the ire of her peers. Humiliated, she flees with Spike in pursuit, only to accidentally tumble down a waterfall, ending up trapped in a valley. Meanwhile, Reeka and Draggle's efforts to ruin the festival backfire when they attempt to flood the area but instead get washed away themselves, thanks to the intervention of the Sea Ponies.
As the search begins for Baby Lickety-Split and Spike, Hydra takes her villainy up a notch by brewing the Smooze, an unstoppable ooze designed to engulf everything in its path and induce grumpiness in those it splashes. Her daughters set out to gather the necessary ingredients, avoiding the terrifying flume ingredient until they have no choice. When Hydra unleashes the Smooze, it storms toward Dream Castle, trapping Baby Lickety-Split and Spike inside a mountain. Forced to evacuate, the ponies watch in despair as the Smooze covers Dream Castle and the surrounding lands.
In a daring rescue mission, two Pegasus ponies, Wind Whistle and North Star, journey to the human world to fetch Megan, the guardian of the Rainbow locket, who brings her younger siblings, Danny and Molly, along for the adventure. In an attempt to counter the Smooze, Megan releases the power of the rainbow, but it’s swallowed whole, leaving the ponies disheartened despite her reassurances that another rainbow awaits them.
Frustrated, Hydra discovers her latest version of the Smooze was missing the flume and dispatches her daughters to retrieve it from a monstrous plant residing on a rocky outcrop. After a battle of wits, they manage to escape with the flume, allowing Hydra to reactivate the Smooze.
Megan leads a group to the Moonchick, who grants them shelter at Paradise Estate and provides a map to find the elusive Flutter Ponies who hold the key to defeating the Smooze. In a separate encounter, Spike, Baby Lickety-Split, and the Grundles—well-meaning creatures whose home has been afflicted by the Smooze—find themselves drifting on a log to safety after narrowly escaping.
The quest to locate the Flutter Ponies unfolds perilously, with Megan nearly succumbing to the Smooze in a field of towering sunflowers. Hydra, frustrated by her failures, sends her pet, Ahgg, to take down her adversaries. Despite facing numerous obstacles, including a web-weaving spider that threatens their journey, Megan and her friends eventually reach Flutter Valley, where they meet Queen Rosedust. Initially resistant to aiding the ponies, Queen Rosedust is ultimately swayed into action when Baby Lickety-Split arrives safe and sound, accompanied by Spike, the Grundles, and Morning Glory, a Flutter Pony she saved.
As the witch sisters prepare to unleash the Smooze's destruction upon the ponies and animals, the Flutter Ponies spring into action, using their magic to obliterate the Smooze with a powerful gust known as Utter Flutter. They capture the witches and return them to the magma of the volcano, ensuring peace and safety for everyone once more. With everything resolved, the ponies joyously return Megan and her siblings back home, victorious and unified.
