The movie begins with a cartoon starring Roger Rabbit and Baby Herman backfired due to Roger's head appearing birds when the director says that it is supposed to be stars.
Meanwhile, detective Eddie Valiant goes to a bar where Angelo mocks him which toon he is working for. Enraged, Eddie attacks him and leaves. When Angelo asks Eddie's girlfriend, Dolores, why does he hate toons, she replies that a toon killed Eddie's brother, Teddy, by dropping a piano on his head.
In one night, Eddie tries to investigate Jessica Rabbit, Roger's wife, when a gorilla kicks him out for sneaking to her dressing room. He gives Roger pictures of Jessica "cheating" on him by playing patty-cake with Marvin Acme, enraging Roger as he runs away.
Just then, a murder of Acme occurs in Acme Warehouse. Roger has become the main suspect of this case. Eddie and Lieutenant Santino see Judge Doom, a corrupt judge of Toontown. He has his henchmen, the Weasels, to search for Roger. When a toon shoe goes near him, Doom shows Eddie and Santino how he deals with toons. He kills a toon shoe by using the Dip, a concoction used to kill toons since they are immortal at being shot, run over, burned, and other injuries.
When Eddie goes back to his office, he is greeted by Baby Herman, who warns him that if Acme's will is not found, Toontown will be sold to Cloverleaf Industries, which had bought the Red Car trolley line. Roger arrives at Eddie's office to tell him that in a jealous rage, he just wrote Jessica a love letter. Eddie threatens Roger that he will call the police, leading Roger and himself to be handcuffed as the Weasels arrive.
When they arrive, Smart Ass, the leader, questions Eddie about Roger in his place. Eddie puts soap into Smart Ass as he falls from the stairs, causing the Weasels to laugh at him being injured. Smart Ass attacks him, warning them that they will die from too much laughter, and leaves the office.
Upon arriving at a bar, Eddie has managed to free himself from Roger and goes to his office to find Jessica there.
By the time he goes back to the bar, Eddie finds Roger dancing and berates him for that. Doom arrives with the Weasels looking for Roger. He senses that Roger is in the bar and throws a cd at Stupid, causing the Weasels to laugh. Doom attacks Smart Ass and reminds him that if he and the other Weasels don't stop laughing, they're gonna die. When Smart Ass asks him to disassemble the bar, Doom says that there's no need for that and uses the "Shave and Haircut" trick to lure Roger out, which he got out and Doom grabs him in his neck.
Just as Doom is about to kill Roger, Eddie made Roger drink alcohol, causing him to have an outburst as they escape from Doom. They drive away with Benny the Cab, leading to a chase between them and the Weasels. They drive to a theater afterwards.
Inside, Roger asks Eddie why does he hate toons.
It is revealed that a toon killed Eddie's brother, Teddy, by dropping a piano on to his head. The toon escapes from Toontown and Eddie manages to remember his description: red eyes and squeaky voice.
At the night, Eddie goes to Maroon Studios to meet with R.K. Maroon. Unknown to him, Roger is knocked down by a mysterious assailant and is dragged away.
At the studio, Maroon refuses to tell Eddie as he is going to be dead if he confesses everything. However, an unseen gunman kills Maroon and Eddie follows the assailant to Toontown.
Upon entering there, he encounters Jessica, whom he thinks that she is the murderer, but she reveals that the long revolver is the gun used to kill Maroon and Doom is responsible for the murder. Eddie, Jessica, and Benny escape from the Weasels. However, by the time they leave Toontown, Doom stops them by using the Dip on Benny.
He takes Eddie and Jessica to the Acme factory where he orders the Weasels to look for Acme's will. But since it is not found, Doom will get a chance to own Toontown.
Meanwhile, Roger finds Benny injured as they drive to the Acme factory.
In the Acme factory, Doom reveals that he is going to retire being judge of Toontown. When Eddie asks him about Cloverleaf Industries, Doom replies that he is the stockholder of it. Roger goes to the warehouse by being flushed down the toilet.
Meanwhile, Doom reveals to erase Toontown and rebuild a freeway from it. Just then, Roger appears, but is knocked down by a falling ton of bricks by Greasy. Doom orders Roger and Jessica to be tied up and tells Eddie that it is over and walks away. However, he slips through the eyeballs and upon hearing the Weasels laugh, warns them that they're gonna die from too much laughing, giving Eddie an idea. When Smart Ass if he can kill Eddie, Doom replies that he can watch first Roger and Jessica die, then he can kill Eddie.
Eddie manages to get the Weasels, except Smart Ass, from laughing themselves to death. His song is interrupted when he gets hit by a vase and Roger says "nose". When Smart Ass points out that nose doesn't rhyme with walls, Eddie kicks him in the crotch and sends him to his death by the Dip. Greasy dies from much laughter, but not before he starts the vehicle that he is driving. Psycho also dies, but not before he sets the Dip onto Roger and Jessica.
When Eddie sends the Dip to the other side, Doom kicks him off the vehicle and his cane-sword to attack Eddie. Eddie tries using a magnet, but is trapped. Doom tries to get him killed by running him over with a steamroller, but Eddie kicks him out of it. When Doom tries to punch him, Eddie manages to cover Doom's hand with glue and uses it as a diversion to shut down the Dip machine.
Afterwards, Eddie sees Doom being flatten by the steamroller. However, Doom is reveals to be a toon when his body becomes flat like toons are. He reinflates himself and reveals to Eddie that he is the toon who killed his brother. Doom tries to kill Eddie with a chainsaw hand, but Eddie kills him by using the Dip on him.
Eddie cleans up the factory by using water and puts Roger and Jessica down. Just then, the toons arrive to find Doom's remains. Roger has revealed to have Acme's will all along by love letter. When he accidentally electrocuted Eddie with a joybuzzer, Roger thinks that he is mad at him. Instead, Eddie grabs Roger and kisses him.
The toons celebrate their victory with a song.