Cowboy doll Woody (Tom Hanks) is co ordinating a reconnaissance mission to find out what presents his owner Andy is getting for his birthday party days before they move to a new house. Unfortunately for Woody, Andy recieves a new spaceman toy, Buzz Lightyear (Tim Allen) who impresses the other toys and Andy, who starts to like Buzz more than Woody. Buzz thinks that he is an actual space ranger, not a toy, and thinks that Woody is interfering with his "mission" to return to his home planet.
Woody, overcome with jealously, decides to replace Buzz at a family outing. He plans to trap Buzz behind a gap in Andy's desk, and rescue him later, but the plan backfires and Buzz falls out of the window and into the bushes in the garden below. The other toys accuse Woody of murdering Buzz out of jealousy, but just as they are about to punish him, Andy returns and takes Woody (instead of Buzz) out to Pizza Planet, a space themed restaurant. However, Buzz manages to sneak aboard, intent on getting revenge on Woody.
When Andy's mother refuels the car, Woody wonders how he will get out of his punishment from the other toys. Suddenly, Buzz appears, and is very bitter over what Andy did to him. The two end up fighting and roll out of the car, which drives off and leaves them stranded. Luckily, Woody sees another vehicle heading for Pizza Planet and knows that he can meet Andy there. He convinces (through trickery) Buzz to come with him (only because if he didn't, the other toys would attack him when he got back.)
When they arrive at Pizza Planet, Buzz climbs into a claw machine shaped like a spaceship (thinking it to be the ship home Woody promised him) filled with 3 eyed, green aliens who think that the claw is a god. When Woody climbs in to try and rescue him, both him and Buzz are captured by Andy's rather homicidal (to toys, at least) neighbour, Sid.
Sid takes them back to his house, and the two desperately try to escape his room before moving day. They encounter nightmarish mutant toys that Sid has butchered and stuck together again, aswell with Sid's dog Scud. Buzz sees an advert for him (Buzz Lightyear toys) and, though he knows that he is a toy, desperately tries to prove himself wrong by jumping off the banister and trying to fly out of the window, which of course fails, and he crashes into the hall below, where he is resecued by Sid's little sister, Hannah.
Woody can't get a depressed Buzz to join in his escape plan, even when the mutant toys- who are actually not evil as the pair first thought- fix his arm, which broke from his fall downstairs, back on. Sid plans to destroy Buzz by tying him to a rocket, but is delayed by a rainstorm. He decides to do it the next morning. That night, Woody convinces Buzz that even if he's not a space ranger, life's still worth living, though he himself despairs that he'll never by Andy's favourite toy again.
Buzz regains his spirit, but before they can escape, Sid wakes up and takes Buzz (still strapped to the rocket) out into the back yard. Woody and the mutant toys rescue him and teach Sid a lesson that you should always treat your toys nicely, sending him screaming indoors. But it's too late, and after all their efforts, Andy's car drives away without them. They climb onto the moving truck but are attacked by Scud. Buzz sacrifices himself to save Woody and attacks the dog. Woody attempts to save Buzz with Andy's RC. The other toys think that he is trying to kill off another toy (they still don't know that Buzz is alive!) and kick him off the back of the truck. However, when they see Woody riding on the back of RC with Buzz, they realize their mistake, and try to help them both back on the truck. But RC's batteries run out, and they are left stranded, this time for good. Until Woody realizes he can rescue them by igniting Buzz' rocket, and manages to save RC by tossing him into the back of the moving van as the soar upwards. Buzz frees himself of the rocket before it explodes, and both of them land safely next to Andy in the car.
On Christmas Eve at the new house, the two toys, now friends, prepare another reconnaissance mission to find out what other toys Andy is getting. After Woody jokingly remarks what toy could be worse than Buzz, they both hear a bark downstairs, and Andy's joyous cry of "Oh wow, a puppy!" And the two share an uneasy look as the film ends.
