A poor farm boy lives in the countryside with his mother, struggling under crushing poverty. When their cow stops giving milk, they decide to sell it. On the road to town, he meets a mysterious peddler and trades the cow for a handful of magic beans. His furious mother throws the beans out the window. Overnight, the discarded beans sprout into a colossal beanstalk stretching into the clouds. Intrigued, the boy climbs the beanstalk with his dog, Crosby. At the top, he enters a cloud castle and encounters Princess Margaret, who seems entranced and announces her upcoming marriage to Prince Tulip, a giant. He meets Tulip’s mother, Madame Hecuba (known as Madame Noir in the original Japanese version), secretly an evil witch. Hecuba caused the disappearance of the princess's parents and placed Margaret under a spell to enable her son's rise to power.

Initially seeking treasure to escape poverty, the boy steals a golden hen that lays golden eggs during his first visit. After returning home wealthy, Crosby convinces him to rescue the princess from the forced marriage. He climbs the beanstalk a second time, determined to stop the wedding. Inside the castle, a magical harp and a group of mice (enchanted former castle residents) reveal crucial information. The harp discloses that Hecuba must renew Margaret's spell daily, and it can be broken by a kiss from someone showing true bravery. He interrupts the wedding ceremony and kisses Margaret, breaking the enchantment and restoring her awareness of Hecuba and Tulip's villainy.

A pursuit erupts after the spell breaks. Confronting Madame Hecuba leads to a pivotal moment where Tulip unexpectedly turns against his mother, causing her demise. The witch's destruction reverses the enchantment on the mice, restoring their human forms. Tulip continues the chase. The boy and Crosby descend the beanstalk with the giant close behind. Reaching the ground, the boy cuts down the beanstalk, sending Tulip falling to his death.

His actions resolve the conflict in the cloud kingdom, freeing its inhabitants. Afterwards, he and Crosby sometimes gaze at the sky, thinking of their friends residing there.