This segment is an adaptation of the fairytale Jack and the Beanstalk by Benjamin Tabart, with Mickey Mouse, Donald Duck, and Goofy as peasants who discovered temperamental Willie the Giant's castle in the sky through the use of some magic beans.
Mickey and the Beanstalk was narrated by Edgar Bergen in live-action sequences, who, with the help of his ventriloquist's dummies Charlie McCarthy and Mortimer Snerd, told the tale to child actress Luana Patten at her birthday party.
Mickey, Donald, and Goofy live in a place called "Happy Valley," which was plagued by a severe drought after a Golden Harp who sang to make people happy was stolen from a nearby castle in Happy Valley. The residents had nothing to eat except one loaf of bread; in a memorable scene, the bread is cut into paper-thin slices in which Donald breaks the fourth wall by saying that he can't stand it. He makes a sandwich out of plates and silverware, but Mickey and Goofy stop him. He then sees an axe and attempts to kill their cow for beef with the axe, but they stop him again and Mickey decides to trade the cow for money to buy food. Goofy and Donald are excited that they'll be able to eat until Mickey comes back and reveals he traded in their beloved bovine for magic beans. Thinking that Mickey got tricked, Donald furiously throws the beans and they fall through a hole in the floor. However, it turns out the beans were magic, as later that night a beanstalk sprouted, and it carried their house upward as it grew. Climbing the gigantic beanstalk they enter a magical kingdom of equal scope, and entering the castle, Mickey, Donald, and Goofy help themselves to a sumptuous feast. This rouses the ire of Willie the Giant, who is able to transform himself into anything. When they are spotted by Willie, Mickey spots a fly swatter and asks Willie to demonstrate his powers by turning into a fly. Willie initially suggests turning into a pink bunny, but when he agrees to their request, he turns into a pink bunny anyway, and spots Mickey, Donald, and Goofy with the fly swatter. Disappointed, Willie captures Mickey, Donald, and Goofy and locks them in a box. Mickey, however, escapes. It was up to Mickey to find the key and rescue them, with the help of the singing Golden Harp. Once freed, the hapless heroes return the Golden Harp to her rightful place and Happy Valley to its former glory, killing the giant by chopping down the beanstalk.
The cartoon ends with Willie the Giant stomping through Hollywood looking for Mickey Mouse. Before the scene closes, Willie notices The Brown Derby restaurant and picks up the building looking for Mickey. Willie notices the restaurant looks like a hat, places it on his head, and stomps off with the HOLLYWOOD lights blinking in the background.