When God distributed wiseness and foolishness through a newly created world, one of the cherubs accidentally dropped all the foolishness on a tiny village called Chelm. So everyone in the village is very dumb. Recently orphaned boy Aaron and his friendly goat Zlateh live there with Aaron's uncle Shlemiel. When an evil sorcerer and his monster attack the village, Aaron and Zlateh have to defend it themselves.

The story focuses on a family of anthropomorphic rabbits, the widowed mother rabbit cautioning her young against entering a vegetable garden grown by a man named Mr. McGregor, telling them: "your Father had an accident there; he was put in a pie by Mrs. McGregor". Whereas her three daughters obediently refrain from entering the garden, going down the lane to pick blackberries, her rebellious son Peter enters the garden to snack on some vegetables. Peter ends up eating more than is good for him and goes looking for parsley to cure his stomach ache.

Raggedy Ann and Andy leave their playroom to rescue Babette, a beautiful French doll kidnapped by a pirate.