The story of the legendary outlaw is portrayed with the characters as humanoid animals.
Alan-a-Dale introduces the story of Robin Hood and Little John, two outlaws living in Sherwood Forest, where they rob from the rich and give to the poor townsfolk of Nottingham, despite the efforts of the Sheriff of Nottingham to stop them. Meanwhile, Prince John and his assistant Sir Hiss arrive in Nottingham on a tour of the kingdom. Knowing the royal coach is laden with riches, Robin and Little John rob Prince John by disguising themselves as fortune tellers. The embarrassed Prince John then puts a bounty on their heads and makes the Sheriff his personal tax collector, who takes pleasure in collecting funds from the townsfolk including hidden money from the crippled blacksmith Otto and a single farthing from a young rabbit, Skippy, who had just received it as a birthday present. However, Robin Hood, disguised as a beggar, sneaks in and gives back some money to the family, as well as his hat and a bow to Skippy in honor of his birthday.
Skippy and his friends test out the bow, but Skippy fires an arrow into the grounds of Maid Marian's castle. The children sneak inside, meeting Maid Marian and her attendant Lady Kluck. Maid Marian reveals she and Robin were childhood sweethearts but they have not seen one another for years. Meanwhile, Friar Tuck visits Robin and Little John, explaining that Prince John is hosting an archery tournament, and the winner will receive a kiss from Maid Marian. Robin decides to participate in the tournament disguised as a stork whilst Little John disguises himself as the Duke of Chutney to get near Prince John. Sir Hiss discovers Robin's identity but is trapped in a barrel of ale by Friar Tuck and Alan-a-Dale. Robin wins the tournament, but Prince John exposes him and has him arrested for execution despite Maid Marian's pleas. Little John threatens Prince John in order to release Robin, which leads to a fight between Prince John's soldiers and the townsfolk, all of which escape to Sherwood Forest.
As Robin and Maid Marian fall in love again, the townsfolk mock Prince John, describing him as the "Phony King of England". Enraged by the insult, Prince John triples the taxes, imprisoning most of the townsfolk who cannot pay. The Sheriff visits Friar Tuck's church to collect from the poor box, but when Friar Tuck attacks the Sheriff, the Sheriff arrests him for high treason. Prince John plans to execute Friar Tuck, giving him the chance to capture Robin Hood when he comes to rescue Friar Tuck.
Robin and Little John sneak in, with Little John managing to free all of the prisoners whilst Robin steals Prince John's taxes, but Sir Hiss awakens to find Robin fleeing. Chaos follows as Robin and the others try to escape to Sherwood Forest. The Sheriff corners Robin after he is forced to return to rescue Tagalong. During the chase, Prince John's castle catches fire and forces a trapped Robin Hood to leap from a tower into the moat below. Little John and Skippy fear Robin is lost, but he surfaces safely after using a reed as a breathing tube, which drives Prince John into a blind rage.
Later, King Richard returns to England, placing his brother, Sir Hiss and the Sheriff under arrest and allows his niece Maid Marian to marry Robin Hood, turning the former outlaw into an in-law.
The alternate ending (included in the "Most Wanted Edition" DVD) is a deleted version of the story's conclusion, primarily utilizing still images from Ken Anderson's original storyboard drawings of the sequence. As Robin Hood leaps off of the castle and into the moat, he is wounded (presumably by one of the arrows shot into the water after him) and carried away to the church for safety. Prince John, enraged that he has once again been outwitted by Robin Hood, finds Little John leaving the church, and suspects the outlaw to be there as well. Sure enough, he finds Maid Marian tending to an unconscious Robin Hood, and draws a dagger to kill them both. Before Prince John can strike, however, he is stopped by his brother, King Richard, having returned from the Crusades. King Richard is appalled to find that Prince John has left his kingdom bleak and oppressed. Abiding his mother's wishes, King Richard decides he cannot banish Prince John from the kingdom, but does grant him severe punishment (which explained how Prince John, Sir Hiss, and the Sheriff ended up in the Royal Rock Pile). King Richard returns Nottingham to its former glory (before leaving for the Third Crusade), knights Robin Hood as Sir Robin of Locksley, and orders Friar Tuck to marry Robin Hood and Maid Marian.
A short finished scene from the planned original ending, featuring King Richard and revealing himself to vulture henchmen Trigger and Nutsy, appeared in the Ken Anderson episode of the 1980s Disney Channel documentary series Disney Family Album. This scene, at least in animated form, does not appear on the Most Wanted Edition DVD.