In 1939 New Orleans, a roguish German Shepherd named Charlie B. Barkin escapes from a dog pound with the help of his friend, a dachshund named Itchy Itchiford. They return to a casino riverboat on the bayou, formerly run by Charlie and his bulldog partner, Carface Caruthers. Not wanting to share the profits with Charlie, Carface persuades him to leave town with 50% of the venture, all the while intending to take him out for a drink later and murder him. Charlie goes to Heaven, where he meets a whippet angel named Annabelle (named in the sequel), who tells him that a gold watch representing his life has stopped. He steals and winds it, sending him back to life, but is told that if he dies again, he cannot return to Heaven. Charlie reunites with Itchy and they discover that Carface is holding an orphan girl named Anne-Marie hostage (presumably kidnapped from the orphanage) because she has the ability to talk to animals and gain information on animal betting sports beforehand, allowing Carface to rig the odds on the rat races and become rich. Charlie and Itchy rescue her, intending to use her abilities to get revenge on Carface, although Charlie tells her that they plan to give their winnings to the poor and help her find parents.
The next day at the race track, Charlie secretly steals a wallet from a couple as they talk to Anne-Marie and become concerned for her ragged appearance. Charlie and Itchy use their winnings to build a successful casino in the junkyard where they live in. Upon discovering that she had been used, Anne-Marie intends to leave them. However, Charlie appeases her by taking pizza and a cake to a family of poor puppies and their foster mother, Flo. While there, Anne-Marie discovers the wallet Charlie had stolen and becomes upset, rushing away where she dreams of living with the couple in its photo. After a nightmare in which he is sent to Hell, meets a hellhound and is attacked by its minions, Charlie awakens to discover that Anne-Marie has gone to return the wallet. The couple, Harold and Kate, whom Anne-Marie met at the race track, welcome her into their home and serve her waffles. While they privately discuss about letting her stay, Charlie arrives outside the house and pretends to wish her good luck at her new home while feigning an illness, and she decides to leave with him. While walking home, Charlie is shot by Carface and his henchman Killer, but the gold watch is unharmed and protects him. He escapes with Anne-Marie and hide in an abandoned building, but the floor breaks and they fall into the underground lair of a massive alligator named King Gator. He and Charlie strike a chord as kindred spirits and he lets them go, but Anne-Marie catches pneumonia.
Meanwhile, Carface and his thugs, looking for Anne-Marie, attack Itchy as he runs their new casino. He escapes, but Carface destroys the casino with his scepter. Itchy confronts Charlie, claiming he cares about Anne-Marie more than him and their business. Charlie accidentally and angrily declares that he uses her and will “dump her in an orphanage” as soon as they are done with her. Anne-Marie overhears the conversation and sadly runs away, but is soon kidnapped by Carface. Flo sends Itchy to get help from Kate and Harold, and he rouses the dogs of the city by his side, carrying Anne-Marie’s stuffed bunny. Charlie returns to the casino , where he is attacked by Carface and his thugs. He fights them off but inadvertently sets an oil fire that immediately engulfs the boat. King Gator arrives after hearing Charlie’s cries, saves him from drowning and eats Carface. As the watch falls into the water, Charlie has to choose between saving it or Anne-Marie. He chooses her instead and sets her adrift towards the shore before diving back into the water, but he fails to retrieve the watch that fills with water and causes Charlie to die again. Meanwhile, Killer pushes Anne-Marie to shore, where Harold, Kate and the authorities arrive, as the boat sinks into the water.
Sometime later, Harold and Kate have adopted Anne-Marie and Itchy. Charlie returns in his ghost form and sadly apologizes to Anne-Marie about his behavior. The whippet angel appears and tells him that because he gave up his life for Anne-Marie, he has regained his place in Heaven again. Anne-Marie awakens and forgives Charlie as he says goodbye and asks her to look after Itchy. She falls back asleep, and Charlie returns to Heaven. During the credits, Carface, angrily realizing that King Gator killed him, vows revenge and attempts to wind his clock of life, before being chased by Annabelle, while Charlie assures the audience that he will return.