1964 saw the cancellation of The Rocky and Bullwinkle Show and life became rather miserable and melancholy for Rocket "Rocky" J. Squirrel and Bullwinkle J. Moose. Their home, Frostbite Falls, has been destroyed in deforestation, and the show's unseen Narrator lives with his mother. Bullwinkle and Rocky head out to address the President of the United States regarding their situation but are stopped for six months by red tape. Their enemies, Fearless Leader, Boris Badenov and Natasha Fatale lose power over Pottsylvania and dig to a Hollywood film studio where they convince Minnie Mogul, an executive, to sign a contract giving her rights to the show, and the villains become live-action characters. FBI agent Karen Sympathy and her boss Cappy Von Trapment inform President Signoff that Fearless Leader intends to make himself the President by brainwashing the American public with his television company, "RBTV" or "Really Bad Television". Karen is sent to a special lighthouse to bring Rocky and Bullwinkle to the real world. She succeeds, the Narrator being brought along as well but not physically seen.
Fearless Leader is informed of Rocky and Bullwinkle's return and sends Boris and Natasha to destroy them. The two take a laptop with them called the CDI which can destroy cartoons and send them to the internet. Karen manages to steal their truck after they drive her car off a cliff, but she is then arrested by the Oklahoma state police when Natasha claims to be Karen. Natasha and Boris steal a helicopter to pursue Rocky and Bullwinkle. Rocky and Bullwinkle are given a ride by Martin and Lewis, two students at Bullwinkle's old university, Wossamotta U. Boris and Natasha get there first, and make a large donation to the university in Bullwinkle's name. In return, the head of the university gives Bullwinkle an honorary "Mooster's Degree", and Bullwinkle addresses the student body, whilst Boris attempts to kill him with the CDI. Rocky recovers his lost ability to fly and saves the oblivious Bullwinkle. Martin and Lewis lend the two their car, but Bullwinkle goes on a wild ride through Chicago. Boris and Natasha once again attempt to kill the two but instead destroy their helicopter. Karen escapes prison with help from a lovestruck Swedish guard named Ole.
Karen, Rocky and Bullwinkle are reunited but then arrested and put on trial, but the presiding Judge Cameo (Whoopi Goldberg) dismisses their case upon recognizing Rocky and Bullwinkle. The three then obtain an old bi-plane from a man named Old Jeb, and escape Boris and Natasha again. Boris and Natasha consider quitting their evil occupations and getting married, but then Fearless Leader calls on the phone. Afraid to admit they failed, they lie to Fearless Leader that they killed Rocky and Bullwinkle. Meanwhile, the plane the heroes fly in is unable to fly with all three aboard. Rocky flies Karen to New York City to stop Fearless Leader, while Bullwinkle flies the plane to the White House. The villains capture Karen and Rocky, whilst Cappy faxes Bullwinkle to RBTV's headquarters to free them. A battle follows, with the heroes winning and convincing the American public to vote for whoever they want but to replant Frostbite Falls' trees. Bullwinkle fiddles with the CDI and inadvertantly zaps the villains to the internet. At the film's end, RBTV becomes "Rocky and Bullwinkle Television" and Karen dates Ole to see the Rocky and Bullwinkle Movie.