Plot

In 1909, in a small town, "Jim Dear" (Lee Millar) gives his wife "Darling" (Peggy Lee) a Cocker Spaniel puppy as a Christmas present. The puppy, named Lady (Barbara Luddy), grows up pampered by her doting owners and befriends her neighbors' dogs, Jock (Bill Thompson) a Scottish Terrier and Trusty (Bill Baucom) an elderly Bloodhound who has lost his sense of smell.

Lady is well-taken care of by her owners, who delight in her company. Lady is given her own bed at home. From the beginning Jim trains Lady to sleep in her own bed, rather than climbing into bed with them. Lady still makes her way into Jim and Darling's bed. Jim and Darling live in a house with a large backyard. The yard is infested with rats and Lady is able to chase them away. At 6 months, she is given a collar with a license. The license is a badge of faith and respectability.

Meanwhile, across town, a stray terrier-mix named Tramp (Larry Roberts) spends his days wandering the streets, feeding on scraps and handouts, and causing trouble for the local dogcatcher. The dogcatcher is determined to catch all the unlicensed dogs in the county.

Fleeing the angry dogcatcher (Lee Millar) after freeing his friends Peg the Pekingese (Peggy Lee) and Bull the Bulldog (Bill Thompson), Tramp finds himself in Lady's neighborhood. He overhears a distraught Lady conversing with Jock and Trusty about her owners' suddenly distant behavior towards her. She then explains how one day after coming home, Jim Dear referred to her as 'that dog.' Another time, she tried to playfully take a ball of yarn from Darling, who then struck Lady.

When Jock and Trusty deduce this is because Darling is pregnant, Tramp inserts himself into the conversation as the "voice of experience" and warns Lady that "when a baby moves in, a dog moves out" as a human heart only has a limited amount of love and affection. Tramp then explains that babies are 'homewreckers,' and that Lady can expect to be lectured frequently, not allowed to scratch herself in the house for the fear of fleas, not allowed to bark as that would wake the baby, be served leftover baby food, and sent to the doghouse in the yard instead of the nice and warm cozy bed by the fireplace. Annoyed, Jock drives him from the yard claiming that no human is that cruel.

Tramp's words cause Lady to fret throughout Darling's pregnancy. Time passes, and lady observes all manner of changes, from strange people entering the house for Darling's baby shower, to Jim Dear leaving early in the morning to get something for Darling. Darling gets a hankering for midnight snacking and sends Jim Dear out in a blizzard to get watermelon and Chop Suey. Finally, the baby is born at the hospital, and Lady feels even more alone, as her owners spend all their time with 'it.'. When the baby boy arrives home, she is allowed to meet and bond with him, dispelling her fears.

Later, Jim Dear and Darling take a short trip, leaving the house, Lady, and the baby in the care of Jim Dear's aunt Sarah (Verna Felton), who brings along her two Siamese cats, Si and Am. Sarah dislikes dogs and prohibits Lady from seeing the baby. Later, the cats destroy the house and pin the deed on Lady by pretending she injured them. Sarah takes Lady to the pet shop and has a muzzle put on her. Lady panics and flees into the street. Lady is bewildered by the traffic on the roads and to escape it she runs into an alley, where she is pursued by three savage dogs until Tramp intervenes to protect her.

Tramp takes Lady to the zoo to have the muzzle removed. Tramp says that they cannot ask the apes as they would not understand, being too closely related to humans. They approach an alligator, who almost bites off Lady's head, causing a Hyena to go into splits. Tramp finds a beaver (Stan Freberg) who is diligent and absent-minded at the zoo who speaks with a lisp. The beaver gets the muzzle off and uses it to help him finish his dam. The beaver uses the muzzle to pull his logs over to the dam to complete it and stem the flow of water.

Tramp then shows Lady his owner-free lifestyle, and they explore the town. Tramp says that he has a family for every day of the week and none of them "own" him. The kindly proprietor of Tony's Restaurant gives them a spaghetti dinner to share (Tony calls Tramp by the name of Butch and indicates that Butch has brought his other female friends to the restaurant before), before they end the evening with a walk in the park.

The next day, Tramp tries to convince Lady to live "footloose and collar free" with him. Despite liking Tramp, she decides her duty is to watch over the baby. As Tramp escorts Lady home, he stops to chase some chickens in a coop. The dogcatcher arrives and starts shooting at them. He pursues them both, but only Lady is caught. Lady is taken to the pound while Tramp looks for her. At the pound, she meets Peg, Bull, and some other strays, who all know Tramp. They reveal he has had many girlfriends in the past and claim that females are his weakness. Lady also learns that dogs are killed at the pound, if they are not claimed within a certain time period.

Sarah comes to claim Lady, and chains her in the backyard as punishment for running away. Jock and Trusty propose that Lady should marry and come live with one of them, to escape the abuse, but she gently refuses them. When Tramp arrives to apologize to Lady, she berates him for his many girlfriends and sends him away, too.

Afterwards, Lady notices a large rat sneaking into the house, crossing the yard in front of her and entering the house through the baby's bedroom window. Lady barks as loudly as she can, but her attempts to alert Sarah fail as Sarah believes that Lady is simply cribbing at being chained to the doghouse. Tramp hears her barking, returns and Lady tells him that a rat has entered the baby's room. Tramp enters the house himself to save the baby. Lady breaks her chain and follows soon after. Tramp is wounded in the battle with the rat but manages to kill it behind a curtain. During the struggle, the baby's crib overturns, and he begins to cry. Sarah comes to investigate, and assumes the dogs attacked the baby. After locking Tramp in a closet, Aunt Sarah puts Lady in the cellar, before calling the pound.

Jim Dear and Darling return home to find that Sarah has locked Lady in the cellar and handed Tramp over to the dogcatcher to euthanize. Disbelieving Sarah's story, Jim Dear frees Lady, who immediately shows them the dead rat.

Overhearing the truth, Jock and Trusty pursue the dogcatcher's cart and try to stop it. After spooking the wagon's horses, the wagon overturns, but ends up injuring Trusty. Just then, Jim and Lady arrive in a taxi and Lady went to Tramp, who is unharmed by the crash, but their happiness and reunion is cut short when they discover that the wagon fell on Trusty. Jock tried to movie Trusty, but he won't move. A tearful Jock started to howl.

Later, at Christmastime, Tramp has become an official part of the family, and he and Lady have four little puppies of their own. Jock and a mostly healed Trusty visit the family. The puppies now provide Trusty (with a cast on his leg) a new audience for his old stories, but he has forgotten them, much to his and everyone else's amusement.