Princess Margaret lives in a castle high within a cloud kingdom, reachable only by climbing a giant beanstalk. Her parents met their end at the hands of Madame Hecuba, an evil witch who invaded the castle alongside her giant son, Tulip. After this tragedy, Hecuba ensnared Margaret in a potent enchantment, warping the princess's perception of reality.

Under this spell, Margaret believes herself profoundly in love with Tulip, seeing him as a dashing prince instead of the monstrous giant he truly is. She proclaims her absolute joy over their upcoming marriage, famously singing "No One's Happier than I" to express her bliss. The enchantment manifests visibly, turning her naturally brown eyes a dull blue. This spell requires daily reinforcement and weakens during sleep, granting Margaret fleeting moments of lucidity.

Hecuba orchestrates the marriage to gain dominion over the cloud kingdom. Her ultimate scheme involves transforming both Margaret and Tulip into tiny rodents after the wedding, securing her permanent rule. Hecuba had already transmuted the castle's original courtiers and servants into mice, isolating Margaret amidst foes.

Jack ascends the beanstalk and uncovers the truth with aid from the enchanted mice and a talking harp. He disrupts a mock wedding ceremony and breaks Hecuba's spell by kissing Margaret. This act restores Margaret's true memories and personality. Awakening, she instantly recognizes Hecuba as her parents' murderer and rejects Tulip.

Freed from the enchantment, Margaret actively joins the fight against Hecuba and Tulip. Following Hecuba's defeat, the enchanted mice revert to their human forms, and the castle starts magically repairing itself. Margaret reclaims her position as the cloud kingdom's rightful ruler. However, she remains bound to her realm, leading to a permanent separation from Jack after he descends to Earth by cutting down the beanstalk. Her story concludes with her governing the cloud kingdom alone, sustaining its existence above the clouds.