It was directed by Jack Donohoe and produced by Walt Disney.
The film begins as if it were a stage play presented by Mother Goose and her wise-cracking, talking goose companion, Sylvester J. Goose, about two nursery rhyme characters, Mary Contrary and Tom Piper, who are about to be married. At the same time Barnaby, a miser, is hiring two crooks to throw Tom into the sea and steal Mary's sheep, thus depriving her of her means of support, and forcing her to marry Barnaby instead. (Mary has just come into a huge inheritance of which she is obviously unaware, but somehow–it is never explained how–Barnaby knows about it and intends to get it for himself.) After smashing Tom on the head with a hammer and tying him in a bag, the two henchmen, Gonzorgo and the silent Roderigo, pass by a gypsy camp. They decide to sell Tom to them instead of drowning him in order to collect a double payment.
Gonzorgo and Roderigo return and tell Mary, Barnaby, and the citizens of Mother Goose Village that Tom has accidentally drowned. They show Mary a phony letter in which Tom tells her that he is abandoning her for her own good and that she would be better off marrying Barnaby. Mary, believing she is destitute, reluctantly accepts the proposal from Barnaby. Barnaby unknowingly arranges for the same gypsies that have Tom to provide entertainment for the marriage. Tom, disguised in drag as the gypsy Floretta, reveals himself and Barnaby pursues the frightened Gonzorgo and Roderigo, furious at their deception. One of the children informs Mary of some sheep tracks leading into The Forest of No Return.
The children, still eager to find their sheep, sneak away into the forest to search for the missing sheep. The trees of the forest come to life and capture them. Tom and Mary follow and find the children in the forest telling stories about the live trees, which, at the moment, seem like ordinary ones. They camp out for the night, and in the morning the trees once again come to life and inform the family that they are now in custody of Mr. Toymaker in Toyland. Excited by this, the group happily continues on, escorted part of the way by the trees.
Through the windows of Mr. Toymaker's house they watch his rather incompetent apprentice, Grumio, present a new machine that makes toys without any manual labor. Overjoyed, Mr. Toymaker speeds up the machine to such a high rate that it explodes, destroying every toy in the factory. The family comes in and offers to help make more toys in time for Christmas.
Grumio also presents another invention, one that shrinks things down to toy size, and if it were used on anything more than once, they would disappear completely. Barnaby, who had been spying on everyone, shrinks down Mr. Toymaker and Tom. When Barnaby's henchmen see him threatening to give Tom two servings of the shrinking formula, they abandon Barnaby and run. They, too, are shrunken to toy size and locked up with Tom in a birdcage.
Barnaby awakens Mary and starts a marriage ceremony threatening to destroy Tom if she resists, and to destroy Mr. Toymaker if he refuses to marry the couple. While he delays the marriage Tom sneaks away with the help of Gonzorgo and Roderigo, and returns with an army of toy soldiers to fight Barnaby. Barnaby easily demolishes the toy soldiers, and is about to obliterate Tom with another dose from the shrink gun, but Mary destroys it with a toy cannon. The liquid splatters all over Barnaby, and shrinks him to Tom's new size. He is challenged to and engages in a sword duel with Tom which he loses. (Whether or not he is killed has been debated; in the film, Tom seems to stab him and he falls from a great height into a toy box, from which he never emerges. Movie tie-ins, however, showed him merely backing into a giant chest accidentally and then being imprisoned in the birdcage in which he once imprisoned Tom.)
After the fight is over, Grumio once again presents a new invention, this time returning people to their original size. It is promptly used on Tom, the Toymaker, Gonzorgo and Roderigo–but not on Barnaby. Tom and Mary are married and they live happily ever after.
- Ray Bolger - Barnaby
- Tommy Sands - Tom Piper
- Annette Funicello - Mary Contrary
- Ed Wynn - Mr. Toymaker
- Tommy Kirk - Grumio
- Kevin Corcoran - Boy Blue
- Henry Calvin and Gene Sheldon - Gonzorgo and Roderigo
- Mary McCarty - Mother Goose
- Ann Jillian - Bo-Peep
- Brian Corcoran - Willie Winkie
- The Mellomen (Thurl Ravenscroft, Bill Lee, Bill Cole, & Max Smith), Candy Candido - The Singing Trees
- During the wedding scene at the end, Bo Peep initially has her staff, but when the camera angle changes, her staff is gone. Moments later, it is shown to be next to Gonzorgo and Rodrigo, when she walks over and picks it up.
- The Toy Soldiers appear around Winter time in the Christmas Parades in the Disney Parks.