Kermit and his new found friends trek across America to find success in Hollywood, but a frog-legs merchant is after Kermit.
The film opens with the various members of the Muppet cast gathering to see the first screening of their new movie.
As the film-within-the-film opens, Kermit the Frog enjoys a relaxing afternoon in a Florida swamp, singing "Rainbow Connection" and strumming his banjo, when he is approached by an agent (Dom DeLuise) who encourages Kermit to pursue a career in show business. Inspired by the idea of "making millions of people happy," Kermit sets off on a cross-country trip to Hollywood, but is soon pursued by the villainous Doc Hopper (Charles Durning), (patterned after Colonel Harland Sanders of "Kentucky Fried Chicken") and his shy assistant Max (Austin Pendleton) in an attempt to convince Kermit to be the new spokesman of his struggling French-fried frog legs restaurant franchise, at which Kermit is horrified. As Kermit continues to spurn Doc's advances, Hopper resorts to increasingly vicious means of persuasion.
Kermit then meets Fozzie Bear, who had been working as a hapless stand-up comedian in a sleazy bar. Kermit invites Fozzie to accompany him, and the two set out in Fozzie’s 1951 Studebaker. The duo’s journey includes misadventures which introduce them to a variety of eccentric human and Muppet characters, including Dr. Teeth and The Electric Mayhem and their manager Scooter (who receive a copy of the script from the pair), Gonzo and Camilla the Chicken, Sweetums (who ran after them after they thought he declined their offer), and the immediately love stricken Miss Piggy.
Kermit and Miss Piggy begin a relationship over dinner that night, when Doc Hopper and Max kidnap Miss Piggy to lure Kermit into a trap. Using an electronic cerebrectomy device, mad scientist Professor Krassman (Mel Brooks), attempts to brainwash Kermit to perform in Doc’s commercials until Miss Piggy, insulted by Krassman, breaks free in a rage and defeats Doc Hopper's henchmen. After receiving a job offer, however, she promptly abandons Kermit in the restaurant alone and sad.
After being joined by Rowlf the Dog and eventually Miss Piggy once more, the Muppets continue their journey. Their car breaks down and during a campfire that night, they sadly consider that they may miss the audition tomorrow, and Gonzo cheers up most of the group with a song about his longing to find his place in the world, while Kermit wanders off, ashamed of himself for seemingly bringing his friends into a dead end, and wondering whether his dreams were really worth leaving home for. Upon consulting a more optimistic vision of himself, Kermit remembers that it was not just his friends' belief in the dream that brought them this far, but also his own faith in himself. Reinvigorated, he returns to camp to find that the Electric Mayhem and Scooter have read the script in advance, and arrived to help them the rest of the way.
Just as it seems they are finally on their way, the group is warned by Max that Doc Hopper has hired an assassin (Scott Walker) to kill Kermit. Kermit decides he will not be hunted by a bully any longer and proposes a Western-style showdown in a nearby
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