The Littles are being hunted by Dr. Hunter, a scientist who is determined to discover a new species of little creatures. When Dr. Hunter comes to Henry's house under the ruse of looking for rodents, he manages to capture Tom and Lucy Little in his vacuum.

Henry's parents find a statue of King Ioda of the Lost City of the Littles. Dr. Hunter wants to take a look at the statue's inscription and so do the Littles. Hunter steals the statue and deciphers the inscription. He learns that the statue will sing a song that will draw all the Littles who hear it to the Lost City.

In wanting to join an exclusive boys club, the Fire Wheels, Henry almost gets hurt trying to perform a dangerous stunt, a task that was requested by Mike, the club leader. Next, Henry is asked to spend the night in a haunted house. However, Tom and Lucy find out that Mike is not intending to let Henry in the club, but instead plans to scare Henry out of the house.

When it gets too risky for the Littles to continue watching movies in the Biggs' theater, they decide to make their own movie using Henry's home movie camera. They decide to produce The Littles Wizard of Oz starring Lucy in the title role. Jealous that his performance wasn't as good as Lucy's, Tom decides to lose the film at the dump, but ends up getting it dropped in one of Dr. Hunter's traps.

Lucy, Frankie and Tom help an old woman who is blind, when her landlord sets out to evict her. The landlord finds her late husband's diary which mentions that he had stashed a large amount of money in their home. The landlord tries to find the money before she does, but the Littles find it first and turn it over to the old woman. The old woman buys the house and sends the sneaky landlord on his way.

Dinky enters a Midget Models contest to win a model airplane. He wins with his entry of the smallest writing of the company name Midget Models and receives notice that he must go to the corporate headquarters in the city to pick up his prize. Dinky boards his rubber band driven plane and soars off to the city to claim his prize, with Tom hot on his tale to save him from certain disaster.