Little Toot is a mischievous little tugboat who lives in the harbor of New York City. While his father Big Toot works hard towing ships throughout the port and out to sea, Little Toot prefers to play about, but carelessly annoys the big ocean liners with his giant figure eights and smokeballs.
After nearly getting into trouble with the Harbor Patrol, Little Toot resolves to be more responsible like his father. He tries to help his father with an ocean liner by pushing on its rudder, but causes it to spin out of control, and eventually crashes it into the city.
Because of this, he is escorted in chains outside the harbor limits by the Harbor Patrol as punishment for his actions. Tearfully, he watches the other boats shun him as a criminal and his father demoted to pulling garbage barges in disgrace.
12 miles outside the Harbor, Little Toot is left alone. As the sky darkens, the sea grows rougher, and he is taunted by menacing bell buoys and ignored by a lighthouse. A sudden storm breaks out around him, and to his surprise, he discovers a ship in distress on the rocks. Thinking quickly, he puffs a smoky S.O.S. signal back to the harbor. With Big Toot in the lead, the other tugboats race to the rescue, but cannot make headway against the rough seas.
Little Toot meanwhile makes it to the stuck liner, which tosses him a tow line. At first, he cannot pull the ship out, but some lightning bolts shock him enough that he pulls the liner free. Trying to rush for safety, Little Toot is engulfed by one final wave as the storm ends.
All seems lost for the little tugboat, but miraculously Little Toot emerges coughing water from his smokestack. To much celebration, he then tows the liner into port all by himself, with Big Toot proudly watching.