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The Muppets are back in a brand-new full-length musical comedy! After graduating college, the Muppets travel to Manhattan to have someone produce their musical “Manhattan Melodies”. When it doesn’t happen, the gang splits up. Kermit makes friends with Jenny (Juliana Donald) and Piggy is jealous, thinking that Kermit found a new girl. Now Rowlf is a vet secretary, Fozzie’s living in a cave, and Piggy is working at a hotel with her partner, but apparently they get fired and now Piggy lives next door to where Kermit works at Pete’s with Jenny. When Jenny and Kermit find producer-in-training Ronny Coleman (Lonny Price), he promises to produce their show. The gang returns to Manhattan, but after getting hit by a car in joy, Kermit gets amnesia and now finds work making ads with other frogs. When Kermit is found at Pete’s, they try to restore his memory.

Big Bird is the central character in this film. A social worker, upon seeing that Big Bird doesn’t live with other birds, sets him up with a Dodo family to be adopted. Unfortunately he is not happy in his new surroundings and, trying to get back to Sesame Street, runs away from home. On the way, he encounters adventure with all kinds of people, and discovers where he really wants to be: His true home - Sesame Street.

When no people are around, the toys still play in the playroom. But since a toy will be frozen forever if a person catches it out of position, they have to be very careful. It’s Christmas Eve, and Rugby the Tiger remembers how he was the Christmas Toy last year, and thinks he’s going to be unwrapped again. And it’s up to Applethe Doll, whom Rugby supplanted as favorite toy, to tell him what’s in store. But Rugby won’t believe her, and tries to get into the Christmas package and lets Meteora, Queen of the Asteroids loose. Unfortunately, she doesn’t know she’s a toy, and thinks she’s landed among aliens. And it’s up to Apple, Mew (the Cat’s toy mouse), and the other toys to get Rugby out of the box and Meteora back in it before they’re found and frozen.