The film begins with the Muppets gathering for a special private screening that humorously retells the story of their first encounters.
In a serene Florida swamp, Kermit the Frog leads a peaceful existence. One day, as he strums his banjo and sings the heartfelt tune, > "Rainbow Connection," he attracts the attention of Bernie, a talent agent who encourages him to chase a dream in show business. However, this moment is interrupted by a sneaky alligator named Arnie. Inspired by the notion of "bringing joy to millions," Kermit embarks on a journey across the country, aiming for Hollywood.
Along the way, Kermit meets Fozzie Bear, who's trying his hand at stand-up comedy. Kermit extends an invitation to Fozzie to join him on his adventure. The two friends set off, cruising in Fozzie's vintage 1951 Studebaker. Unfortunately, their road trip is soon disrupted by Doc Hopper, a determined entrepreneur, and his loyal assistant Max, who aim to recruit Kermit as the new face of their failing French-fried frog legs restaurant. Disturbed by this proposition, Kermit declines, prompting a relentless pursuit from Hopper, who resorts to aggressive tactics to force Kermit’s compliance.
In a quaint old church, Kermit and Fozzie meet Dr. Teeth and the Electric Mayhem, along with their manager Scooter, who lend a hand in camouflaging their car. As they continue their journey, they are joined by Gonzo and his love, Camilla the Chicken, who share their aspirations of stardom. When their old car falters, they trade it at a used car lot and encounter Sweetums. He momentarily dashes away to gather his belongings but quickly rejoins the group.
At a local county fair, Kermit locks eyes with Miss Piggy, and a romantic spark ignites between them. However, their evening is cut short when Hopper and Max kidnap Miss Piggy as bait for Kermit. During their confrontation, the mad scientist Professor Krassman attempts to brainwash Kermit into starring in Hopper's ads, but Miss Piggy heroically intervenes, knocking out the henchmen and inadvertently causing Krassman to fall victim to his own device. Despite her bravery, Miss Piggy is soon swept away by a new job offer, leaving Kermit heartbroken.
As they continue the journey with Rowlf the Dog and a reconciled Miss Piggy, the Muppets face new challenges when their vehicle breaks down in the unforgiving desert. Gathered around a campfire, they confront the harsher realities of their quest, realizing they might miss an important audition. Feeling guilty about leading his friends astray, Kermit temporarily isolates himself for some much-needed introspection. However, a wave of determination washes over him, and upon his return, he finds that the Electric Mayhem, having read the script, come to their rescue in a spacious bus.
The group receives a warning from a reformed Max: Doc Hopper has dispatched an assassin, Snake Walker, to deal with Kermit once and for all. Undeterred, Kermit is resolved to confront his foe and boldly suggests a showdown in a ghost town. Upon arrival, they encounter Dr. Bunsen Honeydew and his assistant Beaker. Kermit pleads to Hopper, appealing to his own dreams and desires, but Hopper remains unmoved and commands his goons to finish off Kermit and his friends. The situation takes a turn when one of Dr. Honeydew's creations, the "insta-grow" pills, unwittingly enlarges Mayhem's drummer, Animal, who frightens off their adversaries.
Eventually, the Muppets arrive at the bustling Hollywood studio and get the chance to meet executive Lew Lord, who eagerly signs them onto a "standard 'rich and famous' contract." But their first attempt at performing the script hilariously spirals into chaos when Gonzo crashes into a prop rainbow, causing an explosion that opens up the roof of the studio. Amazingly, a rainbow shines down, illuminating the crew. In a triumphant finale, all Muppet characters, including those from other beloved Henson creations like Sesame Street, Emmet Otter's Jug-Band Christmas, and The Land of Gorch, unite to sing the concluding verse of "Rainbow Connection" in a heartwarming spectacle as the film comes to a close.
