The show features Mickey Mouse & Friends as they celebrate the magic of dreams. The party starts off with a song and dance routine with Mickey Mouse & Friends. After the dance, Mickey finds out that stubborn Donald does not believe in dreams. To solve the problem, Mickey plans to have everyone's dreams come true, but Donald isn't convinced by Mickey's promise. Minnie wishes to be a princess. Mickey and Minnie dance with invited guests Aurora, Prince Phillip, Cinderella, Prince Charming, Snow White and her Prince. After the royals leave, Goofy's wish to be a pirate comes true. Donald and Goofy party with Captain Hook's pirate crew and welcome invited guests Peter Pan and Wendy.
After the fun, the party is invaded by Captain Hook and his sidekick Mr. Smee. Peter decides to save the day and battle Hook in a heroic sword fight. Donald and Goofy help by getting Smee away from Wendy. Peter, Donald, Goofy, Wendy and the pirates scare Hook into giving in with an alarm clock which reminds Hook of his old nemesis, Tick-Tock the Crocodile. Afterwards, it is revealed that Hook and Smee were working for Maleficent, who decides to show up herself. Maleficent dreams of turning Walt Disney World to The Place Where Nightmares Come True, a play on the slogan The Place Where Dreams Come True. Donald comes up with an idea to save the day. Mickey catches on and realizes that the power of dreams can't be defeated by evil. Mickey Mouse & Friends, with the help of Disney Parks guests, defeat the villains and save the Magic Kingdom. Donald once again believes in dreams, now that he's learned that they can come true. Mickey Mouse & Friends along with all their guests celebrate the power of dreams as the show ends.
When the show first premiered, Mickey, Minnie, Donald and Goofy wore specially made outfits for the show; this was later changed and the characters used special variants of their regular outfits seen at the park.
Initially, Hook and Smee were portrayed as fully costumed characters. Eventually, they were replaced by human actors lip-syncing to Corey Burton and Jeff Bennett's vocals.