Set twelve years after The Muppets From Space, the story begins with Walter, a humble, dwarfish yellow-skinned humanoid puppet, who lives a simple life with his older brother Gary (Jason Segel) in the quaint town of Smalltown. Despite Walter being somewhat of a social misfit, their bond flourishes through their shared passion for the Muppets, which began during their childhood as they watched The Muppet Show. As adults, their dynamic remains intact, and Gary, eager to celebrate his tenth anniversary with his girlfriend Mary (Amy Adams), invites Walter on a trip to Los Angeles.
Upon arrival in Los Angeles, the trio visits the legendary Muppet Theater, only to discover it in dire disrepair. Walter sneaks into Kermit the Frog’s office, where he overhears Statler and Waldorf discussing a shady deal with Tex Richman (Chris Cooper), an oil tycoon looking to demolish the theater for his own profit. Walter quickly realizes the Muppets must raise 10 million dollars to save their beloved theater before it's too late. He shares this shocking news with Gary and Mary, setting the stage for their quest to track down Kermit at his mansion.
Once they find Kermit, he's devastated, understanding that to raise the funds, they must put on a show—a venture the Muppets have long abandoned. Driven by determination, Walter encourages Kermit to revive the troupe. They embark on a journey to reconnect with their old friends. They locate Fozzie Bear, who is now stuck performing with a bunch of subpar Muppet impersonators called the "Moopets" in Reno. With Kermit's persuasion, Fozzie decides to leave the group behind. Meanwhile, Gonzo has turned into a successful plumbing magnate, but his longing for his adventurous past leads him to blow up his business and join the team.
Finding Animal at a celebrity anger-management clinic proves fruitful, but with a stipulation: he must avoid drums per his sponsor, Jack Black. The Muppets venture to Paris to persuade Miss Piggy, now Vogue Paris' editor in chief, to rejoin them, but she initially declines, leading them to temporarily adopt her Moopet counterpart, "Miss Poogy".
As they prepare for their telethon, they face rejection from numerous TV networks, until Veronica (Rashida Jones) reluctantly offers them a two-hour slot, contingent on landing a celebrity guest. The Muppets begin renovations on the theater, but their rehearsals fall flat, and Kermit struggles to secure a guest. When Miss Piggy finally returns and ousts Miss Poogy, she encourages Walter to explore his hidden talent.
With the clock ticking, Kermit pleads with Tex to return the studio, but Tex holds a bitter grudge against the Muppets due to a past incident. Mary feels overlooked after Gary forgets their anniversary and returns home, leading both Gary and Walter to confront their respective struggles, prompting self-realization. Gary steps up, rekindling his relationship with Mary just as they witness the telethon's chaotic launch with Black as the host.
As the telethon unfolds, Tex's sabotage tactics rear their ugly head, but Gary and Mary rush back to save the day, aided by Uncle Deadly’s rebellious turn against Tex. Walter uncovers his talent through a remarkable whistling act, earning the audience's admiration. Tension mounts when they discover a significant donation glitch, leaving them far short of their goal. Kermit reminds everyone that their efforts are what truly matter.
In a heartwarming conclusion, the Muppets, united once again with Walter, Gary, and Mary, greet a throng of enthusiastic fans outside the theater, creating a finale that resonates with joy and camaraderie. As an epilogue unfolds, Gary proposes to Mary, Black is crowned by Hobo Joe’s gang, and after a comical mishap leads Tex to laughter, he returns the Muppet name and theater to the beloved ensemble, heralding a new chapter for the Muppets.
