Dorothy Ashanti Gale is an aspiring singer living in a Kansas trailer park with Aunt Em and Uncle Henry [David Alan Grier]. Her dream seems distant, but she jumps at a chance when she learns the Muppets are looking for a backup singer and hands them a demo CD in a hopeful rush. On her way home, a violent tornado whips across the prairie, sending Aunt Em and Uncle Henry to safety while Dorothy hurries back for Toto, her pet prawn, who becomes her loyal cabin companion. The tornado sweeps them away, and they crash into the unfamiliar colors of Munchkinland, a doorway into the magical Land of Oz.
In this vibrant new world, the Munchkins explain that the Wizard can grant Dorothy’s wish to become a famous singer. She meets the Good Witch of the North and is gifted a pair of shimmering silver slippers by the Wicked Witch of the East, who was toppled when Dorothy’s trailer crushed her. With Toto by her side, Dorothy sets off along the yellow brick road toward the fabled Wizard, chasing the possibility of stardom and a way home.
On the road she befriends a Scarecrow [Steve Whitmire], a Tin Thing [Dave Goelz], and a Cowardly Lion [Eric Jacobson], each hoping the Wizard will bestow a brain, a heart, and courage, respectively. The quartet faces a string of tests and strange encounters as they press toward the Emerald City, where the Wizard awaits with promises and puzzles. Their mission grows urgent when the Wizard sends them to retrieve the Wicked Witch of the West’s magic eye, a tool she uses to glimpse everything she desires in Oz.
The Witch’s fearsome Flying Monkeys sweep in to thwart them. Dorothy, Toto, and the Lion are captured, while the Scarecrow and Tin Thing are dismantled in the chaos. Toto summons the Munchkins to rally and defend their friend, and they manage to divert the Witch’s attention long enough for Dorothy to escape. In a dramatic turn, Dorothy uses a bottle of water to melt the Witch of the West—her one fatal weakness—revealing the magic eye bobbing in the tub, unharmed, and rescue within reach.
With the eye in hand, Dorothy gains surprising control over the Flying Monkeys and uses their help to rebuild the Scarecrow and the Tin Thing. The group returns to the Emerald City to press their case before the Wizard, only to discover that the grand administrator is, in fact, a man on a Hollywood stage—a director operating the whole show to stay hidden from the world. Yet even as the reveal lands, the Wizard fulfills their wishes.
Dorothy learns that personal fame is not her true desire; what she really wants is to return to Aunt Em and the comforts of home. She journeys back toward Munchkinland, guided by Glinda the Good Witch of the South, who reminds her that the silver slippers can whisk her anywhere she pleases. Dorothy finally speaks the familiar line, > "Take me home to Aunt Em," and the slippers whirl her back to Kansas. Back home, she discovers a new twist: she has been chosen to sing with the Muppets, blending her desire for music with the warmth of family and home.