The story is narrated by Alan-a-Dale. He introduces Robin Hood and Little John, who live in Sherwood Forest, robbing from the rich and giving to the overtaxed townsfolk of Nottingham. Meanwhile, Prince John and his counselor Sir Hiss arrive in Nottingham. Sir Hiss had hypnotized Prince John's brother, King Richard, to fight in the third crusade, allowing Prince John to take the throne as de facto King. Prince John is greedy and immature, even sucking his thumb whenever his mother is mentioned. Robin and Little John disguise themselves as fortune tellers and rob Prince John, prompting the Prince to swear revenge and put a bounty on their heads.

Meanwhile, Prince John's henchman, the cheerful Sheriff of Nottingham, taxes the inhabitants of Nottingham excessively under Prince John's orders. Robin gives back some money to a family of rabbits and gives a bow, arrow, and one of his hats to the young rabbit Skippy for his birthday. Skippy takes two of his sisters and his friend Toby to watch him test out the bow but accidentally fires an arrow into the grounds of Nottingham Castle. The children sneak inside and meet Maid Marian and her lady-in-waiting, Lady Kluck. Marian reveals that she and Robin were once childhood sweethearts. Now having returned to Nottingham after spending many years in London, she wonders if Robin remembers her.

Friar Tuck, the local priest, visits Robin and Little John to report that Prince John is hosting an archery tournament, with a kiss from Maid Marian as the prize. Robin disguises himself as a stork and enters the contest, while Little John masquerades as the Duke of Chutney to get close to Prince John. Robin wins the tournament, but Prince John recognizes and exposes him, sentencing him to death despite Marian's pleas. Little John threatens Prince John with a dagger, resulting in a fight between the Nottingham villagers and Prince John's soldiers. Robin's party escapes, bringing along Marian and Lady Kluck.

In the forest, Robin and Marian share a romantic evening, then are surprised by several townsfolk, who sing "The Phony King of England", a song about Prince John's cruelty and fraudulence. The song becomes a hit, so Prince John triples the taxes out of anger. Most of the townspeople who cannot pay are imprisoned. The Sheriff visits Friar Tuck's church to steal from the poor box. Tuck attacks the Sheriff with a quarterstaff, resulting in Tuck's arrest for "treason". Tuck is imprisoned in the castle, and Prince John orders Tuck's execution, hoping to trap Robin Hood.

The night before the execution, Robin Hood and Little John sneak into the castle. Little John manages to free Tuck and the other prisoners, while Robin steals all of Prince John's gold. Hiss awakens and tries to stop them, rousing the castle. Chaos ensues as Robin and the others try to escape to Sherwood Forest, and Robin is forced to return to the castle to rescue Skippy's sister. The Sheriff chases Robin through the castle and attacks him with a lit torch, setting the castle ablaze and forcing Robin to jump into the moat. The soldiers shoot arrows into the moat, but Robin dives to safety and rejoins Little John and Skippy. Hiss chides a despairing Prince John for his failed trap and points out the castle (which belonged to Prince John's mother) is afire, causing Prince John to panic and chase Hiss around the burning castle.

Later, King Richard returns to England, pardons Robin Hood, and sentences Prince John, Hiss, and the Sheriff to hard labor in the Royal Rock Pile. Meanwhile, Robin marries Maid Marian; they leave Nottingham for a honeymoon, with Little John and Skippy in tow.