A young boy named Andy Davis (voiced by John Morris) engages his imagination in a playful heist, utilizing his toys to enact a thrilling bank robbery scenario. The bank itself is cleverly represented by a cardboard box, while the mischievous robber is none other than Mr. Potato Head (voiced by Don Rickles), aided by the trusty Slinky Dog (voiced by Jim Varney). Among the spectators are Bo Peep (voiced by Annie Potts) and her flock of sheep. Just as chaos ensues, the heroic cowboy doll Woody (voiced by Tom Hanks) rides in as the sheriff, with assistance from Rex the dinosaur (voiced by Wallace Shawn). Woody stands out among the toys, equipped with a pull-string that produces iconic phrases like "Reach for the sky!" and "You're my favorite deputy!"
As the classic Randy Newman song "You've Got a Friend in Me" plays during the opening credits, Andy brings Woody downstairs to where his mother (voiced by Laurie Metcalf) is adorning the dining room for his upcoming birthday celebration. Eager for a delay in decorations until they move, Andy's mother agrees but reminds him guests will be arriving shortly. He then rushes back upstairs to retrieve his baby sister, Molly (voiced by Hannah Unkrich), leaving Woody to land on his bed momentarily.
At this point, the toys appear lifeless. But once Andy exits, Woody springs into action, surprised by the sudden realization that today is indeed his birthday. He gathers his fellow toys, instructing Slinky Dog to spread the word while taking stock of their situation. As Woody reminds them to find a "moving buddy," they grow anxious about the impending birthday festivities and the possibility of receiving new toys. Particularly, Rex expresses his concern about the potential arrival of yet another dinosaur. When Hamm (voiced by John Ratzenberger) announces the arrival of the guests, the toys scramble to catch a glimpse, their apprehension increasing as larger packages come into view. Woody attempts to settle the panic, asking, "If I send out the troops, will you all calm down?"
The "troops" Woody mentions include the small green plastic soldiers, directed by Sarge (voiced by R. Lee Ermey), who lower the baby monitor to the first floor and hide in a potted plant to spy on the present-opening festivities. Initially, the gifts appear harmless—a lunchbox, some bed sheets, and a Battleship game—until Andy's mother unveils a surprise package that excites Andy. Just as they are about to discover the new toy, Rex accidentally knocks the speaker off the table, interrupting the moment. Sarge alerts the group as the kids storm upstairs, just in time for Woody to be accidentally knocked off the bed by one of the children. Surprised, the toys recoil when they find that the new occupant of Andy's bed has dethroned Woody's previous spot—enter Buzz Lightyear (voiced by Tim Allen), a self-proclaimed space ranger.
Buzz believes he has crash-landed on an unfamiliar planet en route to sector 12, convinced that his ship (the box he came in) is damaged. Woody introduces himself and tries to convey that Buzz has unwittingly occupied his designated area. As the other toys rush to welcome Buzz, they’re captivated by his advanced gadgets, including the laser and retractable wings. However, Woody harbors skepticism and warns Buzz that such extraordinary feats might simply stem from smoke and mirrors. Buzz refutes Woody’s claims, asserting his ability to fly. He shows off by jumping from the bedpost, leading to a chase that leaves Woody both frustrated and astounded by Buzz's acrobatics.
As the story unfolds with events set to Randy Newman's "Strange Things Are Happening to Me," Andy befriends Buzz, who quickly ascends in popularity. Meanwhile, Woody finds himself drifting from Andy's affections when the unthinkable occurs: as Woody is displaced from the bed, he ends up in the toy chest, a clear sign that Buzz has claimed triumph in Andy's heart.
Unexpected dangers arise when they notice their neighbor Sid (voiced by Erik von Detten) setting up the devastating fate of a Combat Carl action figure. Forewarned by Bo Peep, the toys evolve from mere playthings to strategic comrades, especially when Andy's mother suggests dinner at Pizza Planet, allowing only one toy to accompany Andy. Filled with jealousy, Woody attempts to execute a plan that backfires; Buzz falls out the window, which leads to a cascade of accusations and blame. With family driving off to enjoy time outside, the toys question Woody’s motivations just as Buzz makes a daring escape, leading to the beginning of a complex relationship built through perseverance.
Woody's moral compass guides him as he confronts the tumultuous life of toys and their existential dilemmas under Sid’s malicious rule. As they plot their escape back to Andy's home, they rally together for a finale sequence that involves more daring escapades, leading to a climactic showdown with Sid and the realization that life as a toy, filled with adventure, camaraderie, and unexpected challenges, is always worth living.
As their journey entwines amidst laughter and tears, Woody and Buzz remind each other that friendship and the joy of simply being loved are what truly defines their existence, leading to a heartfelt resolution where the toys find a balance at Andy's side once more, reinforcing that "You’ve got a friend in me!"
