In a war-torn city in Europe during the "Age of Reason," a large Ottoman army is poised to invade. Amidst this tension, a whimsical theatrical production of Baron Munchausen's life unfolds. In the audience, The Right Ordinary Horatio Jackson, the mayor, is determined to uphold the city's values of reason and order. He shockingly orders the execution of a brave soldier, claiming that such heroics demoralize others.
The performance takes an unexpected turn when an elderly man declares himself the real Baron Munchausen, objecting to the play's inaccuracies. As the audience is informed of the reality, the Baron recounts his daring escapades through a series of flashbacks. One tale shares a life-or-death wager with the Grand Turk, showcasing his extraordinary luck and his colorful companions: Berthold, a super-speedy runner; Adolphus, a sharpshooter with extraordinary vision; Gustavus, blessed with incredible hearing; and the immensely strong Albrecht.
Just as the Baron's tale captivates the audience, gunfire erupts, causing Jackson to sever ties with the acting troupe. The Baron then encounters the Angel of Death, who seeks to claim him. However, he is saved by the resourcefulness of Sally Salt, the spirited daughter of the troupe's leader. Together, they try to rally the citizens and fend off the Turkish invaders. The Baron, thrust into action, musters a cannonball ride, narrowly escaping death yet again.
In a twist of fate, he embarks on an adventurous journey on a hot air balloon crafted from women's undergarments, with Sally secretly aboard. They soar to the Moon, where the Baron finds Berthold. However, their visit angers the Moon's giant King, leading to chaos as they attempt to make a hasty escape. Their misadventures ultimately bring them back to Earth, specifically, the fiery domain of Vulcan, the Roman god of fire, who serves them as guests while revealing that Albrecht is his servant.
What follows is an enchanting waltz between the Baron and Vulcan's wife, Venus, which infuriates Vulcan, sending the group tumbling into the South Seas. Swallowed by a colossal sea creature, they search for Gustavus, Adolphus, and the Baron's loyal horse, Bucephalus. During this escapade, the Baron encounters the Angel of Death once more but outsmarts him, escaping through the creature's blowhole with his companions.
Rejuvenated, the Baron heads towards the Turkish army, though his friends struggle with age. After a failed confrontation, he resigns himself to surrendering to the Grand Turk. But his allies rally, and, through miraculous efforts, they triumph over the Turkish forces, liberating the city.
In the aftermath, a celebratory parade takes place, but tragedy strikes as Jackson fires at the Baron, leading to a dramatic encounter with the Angel of Death once again. In a heartfelt public funeral, the narrative shifts, revealing it to be just another chapter recounted by the Baron to an enchanted audience. He reflects, stating it was merely “one of the many occasions on which I met my death,” ultimately concluding with, “everyone who had a talent for it lived happily ever after.”
With the city saved, Sally asks, “It wasn't just a story, was it?” The Baron, with a mischievous grin, rides away on Bucephalus, melting into the horizon, leaving the question of reality and fantasy lingering in the air.
