Shrek, a green ogre that has always enjoyed living in peaceful solitude in his swamp, finds his life disrupted when numerous fairytale beings, including Pinocchio, the Three Little Pigs, and Donkey, are forced into the swamp by order of Lord Farquaad (whom the Hyenas are working for), who are obsessed by many things, including having a perfectly clean and normal realm and his short size.
Shrek decides to travel the country to see Farquaad to try to regain his privacy, with Donkey and Winnie the Pooh, Piglet, Tigger, Rabbit, Eeyore, the Vultures, Jiminy Cricket, Zazu, Kronk and Zhane along with Simba, Timon, Pumbaa, Littlefoot, Cera, Ducky, Spike, and Petrie tagging along. Meanwhile, Farquaad tortures the Gingerbread Man into revealing the whereabouts of the remaining fairytale creatures until his guards and henchmen rush in with an object Farquaad has been searching for: the Magic Mirror. The Mirror tells him that Farquaad technically isn't a king and cannot become one until he marries a princess. The Mirror gives him three princesses to choose from including Cinderella, Snow White, and Princess Fiona. Farquaad chooses Fiona and silences the Mirror before he can mention "the little thing that happens at night". The gang make it to Farquaad's palace in Duloc, where they find themselves in the midst of a tournament; the winner will have the "privilege" of attempting to rescue Fiona from a castle surrounded by lava and protected by a fire-breathing dragon so that Farquaad may marry her. Shrek and Donkey easily beat the other knights, and Farquaad agree to remove the fairytale creatures from the swamp if Shrek goes on to rescue Fiona.
Shrek, Donkey and Pooh and the gang traveled to the castle and split up to find Fiona. Donkey encounters the dragon and sweet-talks the beast to save himself before discovering that the dragon is female. Dragon takes a liking to Donkey and carries him to her chambers. When Shrek finds Fiona, she is appalled at his lack of romanticism. As they are leaving, Shrek manages to save Donkey, caught in Dragon's tender love, and causing her to become irate, chasing Shrek, Fiona, and Donkey and Pooh and friends out of the castle. At first, Fiona is thrilled to be rescued but quickly becomes disgusted when she finds out that Shrek is an ogre. The gang make their return journey to Farquaad's palace, with Shrek and Fiona finding they have more in common with each other along the way, and falling in love. However, at night, Fiona refuses to camp with them, taking shelter in a nearby cave until morning. Shrek, Donkey, and the others stayed awake and watched the stars while Shrek informs them that he plans to build a wall around his swamp when he returns. When Donkey persists as to why Shrek would do this, Shrek tells them that everyone judges him before they know him, therefore he is better off alone.
The next night, Fiona takes shelter in a nearby windmill. When Donkey and the others hears strange noises coming from the windmill, they found out that Fiona has turned into an ogress. Fiona explains she was cursed as a child and turns into an ogre every night, which is why she was locked away in the castle, and that only a kiss from her true love will return her to her proper form. Shrek, about to confess his feelings for Fiona, overhears part of their conversation, and misinterprets her disgust at her transformation into an "ugly beast" to be disgusted with him. Fiona makes Donkey and the others promise not to tell Shrek about the spell, vowing to do it herself, but when the next morning comes, Shrek has brought Lord Farquaad to Fiona. The two return to the castle, while a hurt Shrek returns to the now-vacated swamp.
Shrek finds that despite his privacy, he is miserable and misses Fiona. Donkey and the gang showed up to tell him that Fiona will be getting married shortly, urging Shrek into action to gain Fiona's true love. They are able to travel to Duloc quickly thanks to Dragon, who had escaped her confines and followed Donkey. They interrupt the wedding before Farquaad can kiss Fiona, but not before the sun sets, which causes Fiona to turn into an ogress in front of everyone. While her transformation causes Shrek to fully understand what he overheard at the windmill. Farquaad, disgusted over the change, orders Shrek killed and Fiona imprisoned, but Dragon bursts in and devours Farquaad. Shrek and Fiona admit their love for each other and share a kiss; Fiona is bathed in light as her curse is broken, but is surprised to find that she has remained an ogress. Shrek calms her by assuring her that she is still beautiful. The two of them get married in the swamp and depart on their honeymoon while the rest celebrate by singing "I'm a Believer".
- Simba, Nala, Timon, Pumbaa, Kion, Bunga, Ono, Fuli, Beshte Littlefoot, Cera, Ducky, Petrie, Spike, Chomper, Ruby, Guido, Grandpa Longneck, Grandma Longneck, Mr. Thicknose, Skip, Scar, Shenzi, Banzai, Ed, Janja, Cheezi and Chungu, Ushari, Kiburi, Reirei, Goigoi, Mzingo, and Team Rocket guest star in this Movie.
- Jiminy makes special appearances in this film to to the Shrek version of Pinocchio appearing in the real film series.
- Scar, Shenzi, Banzai, Ed, Janja, Cheezi, Chungu, Ushari, Kiburi, Reirei, Goigoi, and Team Rocket will be working with Lord Farquaad in this movie.
- The storyline continues in Pooh's Adventures of Shrek 2.
- There is a possibility that this will be dedicated in memory of Leslie Carter who sang "Like Wow!" in the credits.
- This film was originally going to be co-directed by ToonJoey34, but he retired from making anymore crossover films, so Daniel will end up making this film himself instead.
- The Emperor's New Groove was released on video in 2001, the same year when Shrek was first released in theaters.
- Due to the real film's adult language, this film will be censored. For example, the "H-word" will be replaced with the word "heck. The "D-word" will be replaced with the word "darn". And the line "Oh, my God!" will be replaced with the line "Oh, my gosh!"
- In this film, Donkey will be revealed to be Eeyore's cousin.