In the small town of Oakey Oaks, Chicken Little (Zach Braff) causes widespread panic and mayhem when he rings the alarm bell, claiming the sky is falling. He is humiliated in front of his father, Buck Cluck (Garry Marshall) and the entire town when, after telling everyone a piece of the sky ‘shaped like a stop sign’ had hit him on the head, he is unable to find it. All the residents assume an acorn must have fallen on him, and Chicken Little becomes a laughing stock.
One year later, Little is still being ridiculed for the incident and is bullied at school by Foxy Loxy (Amy Sedaris) and her band of cronies. His friends Abby Mallard (Joan Cusack), Runt of the Litter (Steve Zahn) and Fish Out of Water (Dan Molina) advise him to talk about his feelings with his father, but Little is more concerned with restoring his reputation outright.
Following a bust-up with Foxy, his father is called in, and Little overhears the school principal stating that Buck had been the school baseball star in his youth. Determined to rekindle his relationship with his father, Chicken Little signs onto the baseball team. In the final inning of the big Oakey Oaks pennant game, with all the other players injured, he is called up to bat, and manages to hit an inside-the-park home run. Despite some confusion, the umpire ultimately declares the game won; Little is hailed as a hero for winning the pennant.
Later that evening, Chicken Little prepares to go to a victory party being thrown for him by Abby, Runt and Fish, but another ‘piece of the sky’ identical to the one he had been hit by the previous year falls through his bedroom window. Not wanting to bring the matter up with him again, Little hides the sky piece from his father and examines it more closely, discovering it to be a bizarre panel-like device designed to blend in with its surroundings. Realising that this is why he was unable to find it the first time, Little calls his friends over to help figure out what the device is.
While playing around with the panel, Fish presses a button on its underside, and it carries him out of Little’s bedroom and into the sky, where it appears to fit into a gap. Disturbed by this, Little, Abby and Runt give chase, and follow Fish to the ballfield, where a series of similar panels appear in the sky; revealed to be part of an invisible UFO’s camouflage. The three sneak aboard the ship and retrieve Fish, but Runt locates a map of the solar system that seems to indicate Earth is being targeted for an alien invasion. Thinking that the UFO is being used to sneak aliens onto the planet undetected by disguising itself as the sky, the group flees to warn the town, inadvertently releasing a small orange creature from the ship in the process, which follows them.
Two metallic aliens give chase, and Chicken Little rings the alarm bell once again to alert the townsfolk. The sound of the bell causes the aliens to flee, leaving the orange creature behind in their haste, and the citizens fail to reach the ballfield in time to see the UFO taking off. As such, no-one believes Little’s claims that aliens are planning to invade, thinking it a repeat of the acorn incident, and he and his father are ridiculed once again. In space, the two aliens send out a distress signal.
The following morning, Chicken Little’s friends attempt to console him, but he wishes to be left alone in dismay. Soon after, the orange creature, having followed Little home, approaches them and identifies itself as Kirby, the child of the two aliens. The group look up to see the sky developing huge cracks and fissures, and a vast fleet of spaceships descends through the camouflage. Kirby tells them that his parents, usually peaceful people, think he has been kidnapped and plan to vaporise Earth in retaliation.
Chicken Little, with the evidence he was telling the truth raging above them, tells Buck off for not believing him, and heads towards the chaos with Kirby in tow. Heartbroken, his father follows, and the two finally reconcile in the safety of a movie theatre. With his father’s help, Little evades the rampaging aliens, who have already zapped Foxy and the mayor out of existence, and delivers Kirby to his parent’s ship atop the town hall, urging them to stop the invasion.
Kirby’s parents beam the two aboard the ship and threaten to kill them for the ‘kidnapping’, but Kirby explains that they had helped him, and the aliens release them, restoring Oakey Oaks and its citizens to normal. The father, Melvin (Fred Willard) and the mother, Tina (Catherine O’Hara) apologise for the misunderstanding, explaining that they visit Earth once a year to pick acorns, renowned in Oakey Oaks as ‘the best in the universe’, and never planned to invade at all, simply wanting to keep hidden to avoid causing panic (the map Runt found was a chart showing that acorns could only be found on Earth, not an attack plan). Tina reveals that one of the panels on their ship’s underside is loose; this is what had hit Chicken Little on both occasions. The townsfolk thus realise that Little was right all along as the aliens depart with Kirby.
The film ends with all the characters watching a parodic Hollywood version of the events, in which Chicken Little is portrayed as a comically macho action hero named Ace (Adam West). Chicken Little, his reputation restored, celebrates with his father and friends.