A lonely old woman longs for a child, and is given a seed by a good fairy. When planted, the seed grows into a flower, and inside theblossom is a tiny girl the size of the old woman's thumb. The old woman names the girl Thumbelina and raises her as her own. Although Thumbelina loves her Mother, she craves companionship from someone her own size.
One night, out in the country, Hubie, Marina, Rocko, Petra, Beanie, Timmy, Pikatwo, Bonkers. Fawn and Buck are camping. While out, taking a drink from the stream, Buck spots a parade of fairies with a king and queen. After they leave, Buck notices they had dropped a sack of fairy dust. He picks it up and returns to the others who believe him almost immediately because of their encounters with other magic beings. However as Buck shows them the fairy dust, Hubie lets out a big sneeze which spreads the dust upon everyone and shrinks them down to thumb-size. They agree to find the fairies again to return to their normal sizes.
Meanwhile Cornelius the fairy prince stumbles upon Thumbelina after hearing her beautiful singing. The two take a ride on Cornelius' bumblebee, and fall in love; during this ride Mrs. Toad and her son Grundel are enchanted by Thumbelina's singing. Cornelius promises to return the next day, but after he's gone, Mrs. Toad kidnaps Thumbelina from her bed and takes her away.
Thumbelina awakens on Mrs. Toad's show boat. Mrs. Toad wants Thumbelina to join their troupe and marry Grundel, who is in love with her. They leave Thumbelina alone on a lily pad in order to fetch a priest, but a friendly swallow, Jacquimo (the narrator of the film), overhears Thumbelina's cries for help and after nearly falling over a waterfall, Hubie and his friends arrive as well to save her. Petra, Beanie and Timmy recognise Jacquimo as their uncle.
Jacquimo's friends, the jitterbugs, as well as Hubie and his friends promise to help Thumbelina get home safely while Jacquimo sets off to find Cornelius. Hubie and his friends are confident that if Jacquimo finds the prince, not only will Thumbelina be with him, but they may be returned to normal.
Meanwhile, Cornelius learns of Thumbelina's kidnapping and ventures out to find her.
While trying to get home, Thumbelina is ambushed by Berkeley Beetle, who scares her new friends away. He is enamoured with her singing, and promises to show her the way home if she sings at his Beetle Ball first. Thumbelina agrees, but when she's received poorly at the Beetle Ball, Beetle kicks her out without helping her.
Winter is approaching. Jacquimo accidentally impales his wing on a thorn and is knocked out by the cold, while Cornelius falls into a lake and is frozen in ice. Grundel, who is still searching for Thumbelina, finds Beetle and forces him to help find Thumbelina.
Thumbelina, Hubie, Marina and the others are taken in by Miss Fieldmouse, who tells them that Cornelius has died. They visit Miss Fieldmouse's neighbor, Mr. Mole who tells them about a dead bird he found in his tunnel earlier that day. It turns out to be Jacquimo, who Thumbelina, Petra, Beanie and Timmy discover to be only unconscious. Mr. Mole wishes to marry Thumbelina; heartbroken over Cornelius's death, Thumbelina accepts. Jacquimo awakens under Thumbelina's care and leaves to find Cornelius, refusing to believe that he is dead. Meanwhile, Beetle brings Cornelius's frozen body to Grundel and informs him that Thumbelina is going to marry the Mole. After the two leave to stop the wedding, the young jitterbugs thaw Cornelius's body out.
At the wedding, Thumbelina realizes at the last moment that she can't marry someone she does not love and refuses to take the vows. Grundel and Beetle crash the wedding, but Thumbelina flees from them and Mr. Mole, with the help of Hubie and his friends. Once outside and free, They are reunited with Jacquimo, who takes them to Cornelius' kingdom, the Vale of the Fairies. Cornelius appears, the pair are reunited, and Thumbelina accepts his proposal of marriage. The two kiss, and Thumbelina is granted her own wings.
With Thumbelina's mother and the fairy court in attendance and with Hubie, Marina and their friends returned to their normal sizes, Thumbelina and Cornelius are wed.