On Christmas morning, 1909, in a quaint Midwestern town, Jim Dear gives his wife Darling an American cocker spaniel puppy which she names Lady. Lady enjoys a happy life with the couple and two local neighborhood dogs, Jock, a Scottish terrier, and Trusty, a bloodhound. Meanwhile, across town, a stray mutt named Tramp lives on his own, dining on scraps from Tony’s restaurant and protecting his friends from the local dogcatcher. One day, Lady is saddened after her owners begin treating her rather coldly. Jock and Trusty visit her and determine that their change in behavior is due to Darling expecting a baby. While Jock and Trusty try to explain what a baby is, Tramp interrupts the conversation and offers his own thoughts on the matter, making Jock and Trusty take an immediate dislike to the stray and order him out of the yard. As Tramp leaves, he reminds Lady that “when the baby moves in, the dog moves out.”
Eventually, the baby arrives and the couple introduces Lady to the infant, whom Lady grows fond of. Soon after, Jim Dear and Darling leave for a trip, with their Aunt Sarah looking after the baby and the house. Aunt Sarah’s two trouble-making Siamese cats, Si and Am, trick her into thinking that Lady attacked them with the house a mess. Aunt Sarah takes Lady to a pet shop to get a muzzle. Lady flees in horror, only to be pursued by a pack of stray dogs. Tramp rescues her and finds a beaver at the local zoo who can remove the muzzle. Later, Tramp shows Lady how he lives “footloose and collar-free”, eventually leading into a candlelit Italian dinner at Tony’s. Lady begins to fall in love with Tramp, but she chooses to return home in order to watch over the baby. Tramp offers to escort Lady back home, but when Tramp decides to chase hens around a farmyard for fun, Lady is captured by the dog catcher and brought to the local dog pound. While at the pound, the other dogs reveal to Lady that Tramp’s had multiple girlfriends in the past and they feel it’s unlikely he’ll ever settle down. She is eventually claimed by Aunt Sarah, who chains her in the backyard as punishment for running away.
Jock and Trusty visit to comfort Lady, but when Tramp arrives to apologize, Lady angrily confronts him about his past girlfriends. Just as Tramp leaves, Lady sees a rat trying to sneak into the house. She barks frantically, but Aunt Sarah tells her to be quiet. Tramp hears her barking and rushes back, entering the house and corners the rat in the nursery. Lady breaks free and rushes to the nursery, where Tramp inadvertently knocks over the baby’s crib before ultimately killing the rat. The commotion alerts Aunt Sarah, who sees both dogs and assumes that they are responsible. She pushes Tramp in a closet and locks Lady in the basement, then calls the pound to get rid of Tramp. Jim Dear and Darling return home as the dog catcher departs, and when they release Lady, she leads them to the dead rat. Realizing Tramp’s true intentions, Jock and Trusty chase after the dog catcher’s wagon. The dogs are able to track down the wagon and scare the horses, causing the wagon to crash. Jim Dear arrives in a taxi with Lady, and she reunites with Tramp, but their joy is short-lived when they see Trusty pinned underneath the wagon, motionless, with Jock howling mournfully.
That Christmas, Tramp’s been adopted into the family, and he and Lady have started a family of their own, with three daughters who look similar to Lady and a son who looks similar to Tramp. Jock comes to see the family along with Trusty, who’s still alive and merely suffered from a broken leg, which is still healing. Thanks to the puppies, Trusty has a fresh audience for his old stories, but he has forgotten them.