The movie begins with Winnie the Pooh and his friends going on a vacation at the beach, which was cut short by the warring Capulets and Montagues, portrayed as white and brown colored seals respectively. Their feud is watched sadly by the Capulets' only daughter, Juliet. A fight on the shore is ended when a large and monstrous elephant seal named Prince appears, warning the two groups that should there be any more disturbance, the seal who caused it shall be exiled to Shark Island, a fin shaped rock where a Shark dwells.
Romeo, the Montagues' only son, is depressed, wishing to fall in love. His humorous friend Mercutio urges him and another of his friends, Benvolio, to go to a Capulet party later that evening. Arriving at the party, covered in white sand to look like a Capulet, Romeo falls in love with Juliet at first sight. Juliet, however, was promised by her father to marry Prince, who attends the party. Romeo and his friends manage to wreak havoc, and are revealed to be Montagues. Later that evening, the famous balcony scene is recreated on a cliff on the beach where a tree grows, and Romeo promises Juliet that they shall marry the next morning, and she will not have to marry Prince.
Romeo begs Friar Lawrence, in this story a sea otter, to wed them. After some thought, he believes their marriage will end the feud of their families, and agrees. They are wed that very morning, and traverse the sea in their happiness. However they are discovered by the fish in the ocean, who strongly oppose their being together. One fish (whose name is not revealed until the end of the movie) finds them a cute couple, but warns them that they will be in trouble if Prince find out.
Back on the beach, Mercutio begins creating insulting jokes against the Capulets, and the Prince is headed in that direction. When he arrives, Mercutio insults him as well. Romeo rushes to aid his friend, but after a struggle Mercutio falls off the cliff where Juliet met Romeo the previous evening, and seems to die.
Prince, jealous of Romeo having Juliet's affection rather than him, exiles Romeo to Shark Island. In despair, Juliet seeks the Friar's help, and he gives her a potion to put her in a death-like state. Mercutio is alive and sees the whole thing, remarking "What a tangled web we weave" after Juliet takes the potion.
Lawrence shows the Capulet seals that Juliet is "dead", right as they were celebrating the marriage. But Benvolio sees her as well, and swims to Shark Island to tell Romeo. The Friar gives chase, but is attacked by the Shark. After receiving the terrible news, Romeo heads to the shore to see if Juliet's death is true. Friar Lawrence arrives too late and tries to follow Romeo, only to have his tail maimed by the Shark. After an undersea chase and some help from the fish Romeo and Juliet met earlier, Lawrence escapes and heads to the beach.
A heartbroken Romeo walks past the mourning Capulets and tries to kiss Juliet, only to have some of the potion slip into his own mouth, putting him in a death-like state as well. Both groups of seals begin to weep for their loss, and Lawrence, who has just arrived, takes the moment to teach them a lesson about where hatred leads them and how fighting simply leads to more and more trouble for themselves. Suddenly, Romeo and Juliet awaken, and all is well. Mercutio is revealed to be alive, Prince finds a new mate - a seal as monstrous as he is - and the movie ends with the two families at peace, and Romeo and Juliet remaining together.
Just then, a note was given to Pooh and the others from L.B. Mammoth informing them to go to if they want to have a vacation, they'll come down to Mammoth Pictures.
Short credits follow. The fish in the movie is revealed as Kissy (the kissing fish) and says goodbye to the audience as the final word. With the words "To be continued in Pooh's Adventures of Cats Don't Dance".