Stannie Dum (Stan Laurel) and Ollie Dee (Oliver Hardy) rent rooms in Mother Peep's shoe in Toyland. When Mother Peep can't make her mortgage payment to evil Silas Barnaby (Harry Kleinbach), he attempts to blackmail her into having Little Bo-Peep (Charlotte Henry) marry him, despite the girl's attachment to Tom-Tom Piper. Stannie and Ollie offer their assistance to Mother Peep, Bo-Peep and Piper, and later enlist an army of wooden soldiers to battle Barnaby's cave-dwelling bogeymen.

Having to leave Melbourne, two song-and-dance men sign on for work as divers in Bali where they vie for the favor of Princess Lala. The dive produces a chest of priceless jewels which arouses the shady locals.