Elmo loves his fuzzy, well-worn blue blanket more than anything in the whole world. However, when Elmo's blanket gets sucked through a colorful, swirling tunnel into Grouchland, the yuckiest place on earth, Elmo goes on an adventure to Grouchland to retrieve his prized possession.

When Gonzo's breakfast cereal tells him that he's the descendant of aliens from another planet, his attempts at extraterrestrial communication get him kidnapped by a secret government agency, prompting the Muppets to spring into action. It's hard to believe Gonzo's story at first, but Kermit and friends soon find themselves on an epic journey into outer space filled with plenty of intergalactic misadventures.