Set at the turn of the century, smooth talking con man Eddie Johnson weasels his way into a job at friend and rival Joe Rocco's Coney Island night spot. Eddie meets the club's star attraction (and Joe's love interest), Kate Farley, a brash singer with a penchant for flashy clothes. Eddie and Kate argue as he tries to soften her image. Eventually, Kate becomes the toast of Coney Island and the two fall in love. Joe then tries to sabotage their marriage plans.

The people of Hamelin, overrun with rats, offer a bag of gold to anyone who can get rid of the rats. A piper offers to do the job, and successfully lures the rats into a mirage of cheese, which disappears. The citizens, disappointed that all he did was play a tune, offer only pocket change. The piper, angered, plays a new tune that has all the children of the city follow him, even the new twins the stork is preparing to deliver.

A baby is transported to Lullaby Land, where pacifiers grow on trees, diapers, bottles, and potty chairs march on parade, and the gingham dog comes to life. He wanders into the "keep out" cave, full of things like scissors, knives, and fountain pens that are not for baby and begins smashing watches with hammers and playing with giant matches. The matches chase after him; baby escapes by riding a bar of soap across a pond, but the smoke from the matches turns into boogey-men. The benevolent sandman, dressed as a wizard, spots baby hiding and works his magic, bringing us back to the real nursery.