The film opens with Jafar, Grand Vizier to the Sultan of the fictional sultanate of Agrabah, attempting to retrieve a magical oil lampcontaining a genie from the Cave of Wonders. He enlists a petty thief to enter the cave and retrieve it, whose attempt fails. Jafar and his parrot assistant, Iago, learn that only a "Diamond in the Rough" can enter the cave. Meanwhile, Jasmine, the Sultan's daughter, frustrated with her life in the palace, flees to Agrabah's marketplace. There she meets street rat Aladdin and his monkey pet, Abu, and the two begin to form a friendship. After Aladdin is arrested by orders of Jafar, Jasmine orders Jafar to have him released. Jafar lies to her that Aladdin was already executed, leaving Jasmine heartbroken.
Jafar, disguised as an elderly man, releases Aladdin and Abu from the dungeon and leads them to the Cave of Wonders, promising a reward in return for retrieving the lamp. The cave allows them to enter but instructs them to touch nothing but the lamp. Aladdin and Abu find a magic carpet. Aladdin obtains the lamp but Abu's attempt to steal a gem backfires and causes the cave to collapse. The carpet flies them back to the entrance and Aladdin delivers the lamp to Jafar, who then tries to kill him. Abu then thwarts Jafar and steals back the lamp as he, the carpet, and Aladdin fall back into the cave just as it closes.
In the collapsed cave, Aladdin rubs the lamp, inadvertently unleashing Genie, who reveals he will grant Aladdin three wishes with the exception of murder, romance, revival of the dead or additional wishes. Aladdin tricks the genie into magically freeing himself, Abu, and the carpet from the cave without actually using a wish; thereafter, Genie states that Aladdin will not receive anymore magic help unless he explicitly states "I wish". While contemplating his wishes, Genie admits he would wish for freedom, since he is a prisoner to his lamp. Aladdin promises to free Genie as his last wish. Aladdin decides to use his first wish to become a prince in order to be legally able to court Jasmine.
Meanwhile, Jafar attempts to mind control the Sultan into arranging a marriage between himself and Jasmine in order to become Sultan himself. Before he is able to succeed, Aladdin appears and parades into the Sultan's palace as "Prince Ali of Ababwa". Sultan is impressed but Jasmine rejects Ali as a suitor. Despite the Genie's suggestion that Aladdin to tell the princess who he really is, Aladdin keeps up his act as a suave prince and takes Jasmine around the world on the magic carpet. Jasmine suspects that Ali is actually the man she met in the marketplace; during the trip, she tricks Aladdin into admitting it and demands the truth from him. Aladdin fabricates a story that he sometimes dresses as a commoner to escape palace life. The couple kisses as Aladdin returns her home.
Afterwards, Aladdin is kidnapped and thrown into the ocean by Jafar who makes a second attempt to arrange a marriage. Genie rescues Aladdin as his second wish; Aladdin returns to the palace and exposes Jafar's plot. Jafar flees after noticing the lamp in Aladdin's possession, realizing who Aladdin is. Aladdin has second thoughts about freeing Genie, believing that without him he is "just Aladdin". Iago steals the lamp and brings it to Jafar. Jafar becomes Genie's new master, using his first two wishes to usurp the Sultan's throne and become the most powerful sorcerer in the world. Using his new powers, Jafar enslaves Jasmine and the Sultan, exposes Aladdin as a street rat, then exiles him and Abu to a frozen wasteland.
Aladdin and Abu use the magic carpet to return to the palace, where Aladdin sneaks in to try and recapture the lamp. Jafar proposes using his third wish to make Jasmine his queen. Genie protests that he cannot grant that wish, but Jasmine decided to feign interest in Jafar, allowing Aladdin to try to grab the lamp. Aladdin gets caught and battles Jafar, who transforms himself into an enormous cobra and traps Aladdin. Jafar claims to be "the most powerful being on Earth", to which Aladdin argues that Genie is more powerful. Faced with this realization, Jafar uses his final wish to become a genie himself. However, he then discovers that genies are not free entities as he is sucked into a lamp of his own, dragging Iago with him. The Genie sends Jafar's lamp flying into the Cave of Wonders. Genie urges Aladdin that he should use his third wish to regain his princeship, warning Aladdin that he has never seen a woman like Jasmine, but Aladdin, realizing that he cannot keep pretending to be something he is not, decides to keep his promise and wish for Genie's freedom. Seeing Jasmine's love for Aladdin, the Sultan changes the law to allow her to marry whomever she deems worthy. The newly free Genie leaves to explore the world while Aladdin and Jasmine celebrate their engagement.
- Devious Diesel will be working with Jafar in both version of this film.
- Diesel 10 will be working with Jafar in the upcoming remake.
- Jafar will get his revenge on Thomas and his friends in Winnie the Pooh and the Care Bear's Adventures in Wonderland and YakkoWarnerMovies101's film Pooh and Ash's Adventures of Scooby-Doo: Halloween Hassle at Dracula's Castle.
- Aladdin was released in Theatres as well as the last 10 episodes of Thomas and Friends: Series 3 were broadcast in 1992.