It's a beautiful day in Strawberry Land; shining above the peaceful valley is Mr. Sun, our narrator and guide through this world. Mr. Sun tells the viewer that the valley has the biggest and best strawberries this side of the rainbow thanks to the tender work of their caretaker Strawberry Shortcake (a young girl who lives in a shortcake that's surrounded by giant blades of grass). Miss Strawberry, like the other Berry Folk, is still fast asleep. The only person who's awake in Strawberry Land is the Peculiar Purple Pieman of Porcupine Peak, a gangly and sneaky fellow who wants all the valley's prized berries for himself. Mr. Sun gets the chills just thinking about him and instead encourages the viewer to focus on the Berry Folk and the special day they are about to have.
The "Strawberry Shortcake Opening Theme" shows Strawberry Shortcake going through all her usual activities on a typical day at home: waking up, doing chores, playing outside, and tending to her berry patch. We then go back to the current day as Strawberry finally wakes up and realizes that her alarm clock has overslept again. Her nudging awakens the alarm, which in turn rouses her calico cat Custard from his rest on the floor beside her bed. Custard is not pleased to be up and makes an ugly face – Strawberry encourages him to greet the day right by smiling first thing in the morning. She then skips outside and passes the same message along to all the plants and animals nearby as they wake up ("Smile a Sunny Morning").
The Peculiar Purple Pieman spies on Strawberry through his magic pie tin and recognizes an opportunity to nab her berries. He sends out a whole flock of Berry Birds to attack her garden; there are too many for the small girl to fight off, although she tries the best she can. Fortunately, a nearby tree comes to her aid and scares off the birds with no trouble. A grateful Strawberry makes the mighty tree her official scarecrow (much to his pleasure). But the Pieman has not given up on his desire, seeing this setback as an excuse to fight dirty.
Meanwhile, the other inhabitants in Strawberry Land are all up and going about their daily business. Huckleberry Pie's business is to snooze with his dog Pupcake while fishing by the river. Mr. Sun rouses the lazy boy by reminding him that it's Strawberry Shortcake's birthday and he needs to plan the party right away. The laid-back Huckleberry goes to collect the rest of the Berry Folk: Blueberry Muffin, the forgetful Southern belle; scholarly Plum Pudding; perky Raspberry Tart, who speaks her mind before she thinks things through; and baby Apple Dumplin'. While Blueberry Muffin keeps forgetting whose birthday it is and Raspberry Tart is convinced Strawberry's turning seven (she's six), Plum Pudding calculates that a surprise party would produce the most enjoyable experience for everyone. And Apple Dumplin' contributes to the planning even though she's too young to talk yet – Blueberry Muffin interprets her scribbled handwriting as a suggestion that the party be held at Lilac Park. The others agree and leave to set up the party.
An exhausted Mr. Sun has climbed as high in the sky as he can go, which means it's high noon and time for lunch. Strawberry has lunch all set out, but one by one her friends – Custard, Escargot the giant snail, and all the rest – pretend they have other plans and blow her off. They're really just meeting in Lilac Park to get ready for the party. But poor Strawberry thinks that they don't like her anymore and sits down sobbing in front of a giant book of matches. Nobody at the party can think of a proper gift to give to their friend, so Huckleberry sends out little Lucky Bug to follow the birthday girl and scout out ideas.
Lucky Bug lands on top of the matchbook just as an old peddler – the Pieman in disguise – hobbles over to the still crying little girl. He offers to sell her a beautiful, shiny, bright red watering can that never needs to be filled because it magically pours a never-ending supply of water. Strawberry is enchanted by it but cannot afford to pay the $7.50 price tag. However, Lucky Bug witnessed the whole conversation and, after Strawberry leaves, informs the peddler that he might be able to sell one to the folks over in Lilac Park. Everyone pools their savings to buy the watering can for their friend; the devious Pieman can barely suppress an evil chuckle as he creeps away.
An extremely sad Strawberry Shortcake sits in a flower field and wonders aloud why all of her friends have abandoned her. This upsets Mr. Sun so much that he calls down to her and suggests she go see what everyone is doing over in Lilac Park. The curious girl runs across the field and is greeted with cheers when she arrives at her birthday celebration. She is very surprised – she forgot all about her birthday and is overjoyed at the lovely party her friends have prepared for her. At the end of the festivities, Blueberry Muffin presents the wrapped gift to the birthday girl on behalf of everyone in Strawberry Land. Strawberry is absolutely ecstatic when she unwraps the watering can and assures her friends that she loves them all "berry" much.
Nobody really gets what's so special about the watering can until she demonstrates how it works. When Huckleberry Pie asks how to turn it off, a problem arises: the peddler easily stopped the water by tipping the can back, but Strawberry can't seem to do it! Huckleberry Pie's attempt to command the can to stop doesn't work either. All appears to be fine when Plum Pudding caps the spout, but the built up pressure causes the cap to shoot off, the can to spring leaks, and the water to come out with greater force. Shoving a strawberry in the top only makes things worse – soon water is squirting all over the place and the entire valley is flooded!
Everyone takes refuge in Escargot's cart and bemoans the state of their home. They float past an island where the Peculiar Purple Pieman (still dressed as a peddler) is standing; the dastardly villain reveals himself and demands that all the berries be transported to the Pie Tin Palace before he reverses the spell and makes the water go away. The dejected Berry Folk have no choice, so they load up carts with berries and deliver them to the Pieman. As promised, the waters recede once the goods are delivered, and the once-beautiful Strawberry Land is now a sorry-looking mud hole. Suddenly everyone realizes that they've lost track of Apple Dumplin during all the excitement. Lucky Bug buzzes over to Huckleberry Pie and reports that the baby fell asleep in one of the berry carts and is now in the Pieman's custody!
Fortunately, Mr. Sun comes to the rescue by offering Strawberry Shortcake a magic birthday wish. The clever girl remembers the fearsome tree that scared the Berry Birds away that morning and wishes for a whole army of trees to stand up to the Pieman. Mr. Sun grants her wish and rallies a gigantic tree army to march towards the Pie Tin Palace ("Count Off"). The force of their marching shakes the ground so much that the palace actually collapses!
The stunned Pieman wakes up amongst the rubble and spots Apple Dumplin crawling over to him. She wordlessly hands him a surrender notice to sign; when he refuses, the trees that have surrounded him begin to ferociously growl and wave their limbs, scaring him so much that he immediately signs the note. He pleads for mercy when Strawberry and her friends arrive to reclaim Apple Dumplin and the berries. But the kind-hearted Miss Shortcake offers to be friends with him despite everything he has done. She assures him there is good in everyone and suggests he take his pies to their marker – in doing so she exposes him to her berry talk (substituting "berry" for words that rhyme with it, like "very" and "merry") and teaches him to talk "Berry Talk" too. The pair have soon bonded and promise to be "berry good friends to the end!"