As Wilby Daniels (Tim Allen) and his family return from their vacation, they face a shocking scenario— their home has been burglarized not once, but twice. Frustration mounts as Wilby suspects district attorney John Slade of being involved in organized crime. After a second break-in, which now also affects their naval neighbor Gordon C. Brenner, Wilby reaches his breaking point. Determined to restore peace to Medfield, he announces his candidacy for district attorney.
Simultaneously, two bumbling thieves, Freddie and Dip, stumble upon the Borgia ring at a local museum, believing it to be highly valuable. They pawn it off to Tim, an ice cream vendor with an affection for his Old English Sheepdog, Elwood. Tim plans to surprise his roller derby-star-turned-pastry-assistant girlfriend, Katrinka, with the ring.
As Wilby gears up for his live television debut, he opens up to his wife Betty about his odd past as a shape-shifter. Skeptical, she listens as he reveals the inscription on the Borgia ring—"In canis corpore transmuto"—which enables his transformation into a dog. In an unexpected twist before going live, Tim uncovers the inscription and, upon reading it aloud, causes Elwood to disappear and reappear as Wilby. In the uproar, Wilby's son Brian observes his father's sudden hair growth, leading to chaos as Wilby, now in dog form, makes a hasty exit from their home, avoiding the news cameras. Confused, Tim attempts to interact with "Elwood," completely unaware that it’s actually Wilby experiencing this strange predicament.
As the magic begins to fade, Wilby looks to reclaim the ring while grappling with the challenges of his newfound vulnerability as a candidate. The situation becomes more intense when Katrinka reveals the ring, and Wilby faces an unanticipated crisis. His impassioned speech at the ladies' garden club spirals into chaos as he struggles with the complications of being Elwood. Tim finds himself baffled by the talking dog, who appears to be acting in ways that only bewilder him further.
As the mystery deepens around Wilby's bizarre transformations, Agent Raymond Slade, becomes suspicious that there's more going on than mere chance. His investigation leads him to a series of revelations that trigger an explosive sequence of events. Katrinka's mission to find the ring takes an unexpected twist when it accidentally lands in a vat of cherry pie filling meant for a fundraiser for Slade. This incident sparks a flurry of activity as everyone engages in an all-out pie fight, fueled by the hunt for the elusive Borgia ring.
In the heat of the hilarity, thugs recover the ring and try to sell it to an undercover detective, unknowingly drawing Wilby back into the fray. A poignant moment arrives when Slade overhears the museum curator discussing a past occurrence of a man who transformed into a sheepdog, leading him to extend an invitation to Wilby for a private meeting. During this encounter, Slade advises Wilby to withdraw from the election. However, fueled by determination, Wilby refuses and instead vows to investigate Slade for his alleged connections to organized crime once he takes office.
Seizing an opportunity, Slade reads the inscription aloud, ensuring Wilby's transformation into a canine is permanent. Ignoring warnings about the potential danger of his actions, Slade continues to chant the incantation, putting himself at risk with each word.
Caught in a whirlwind of political maneuvering, Wilby struggles to evade capture from Slade, who wields the entire police force and animal control against him. In a last-minute attempt to gain his freedom, Wilby turns to the dog pound, where he unexpectedly allies with other dogs who share his plight. Together, they devise a clever plan to outsmart Slade's henchmen and regain Wilby's freedom.
Wilby, with the help of his loyal friends Brian and Tim, all while Tim believes he is still conversing with Elwood, navigates deeper into Slade's world of corruption. They orchestrate a ruse to trap Slade at Roshak's warehouse, ultimately capturing evidence to expose Slade's corruption with the use of a tape recorder.
Then, as events escalate, the local dogs become increasingly crucial to the unfolding drama. In a twist of irony, when Slade recites the inscription on the ring to further entrap Wilby, he inadvertently invokes the curse, transforming himself into a bulldog. The powerful district attorney is suddenly rendered powerless and reduced to a mere dog, confronting the reality of his own ambition.
As the climax approaches, Wilby's relentless efforts culminate in a resounding success—he is elected as the new district attorney, while Slade faces the consequences of his misdeeds, becoming ensnared by the authorities. In a heartfelt finale, Tim proposes to Katrinka. Together, they join Wilby in adopting the dogs from the pound, ensuring a hopeful future for all involved.
