In London, circa 1897, a young mouse named Olivia Flaversham is celebrating her birthday with her toymaker father, Hiram. Suddenly, Fidget, a bat with a peg leg, barges in, and after a brief struggle, disappears with Hiram. Fidget takes Hiram to Professor Ratigan who commands him to create a clockwork robot which mimics the Queen of the Mice so Ratigan can rule England. Hiram initially refuses to participate in the scheme, but agrees when Ratigan threatens Olivia.
Returning to London after a tour of duty in Afghanistan, Dr. David Q. Dawson stumbles upon Olivia, who is searching for the renowned Basil of Baker Street. Dawson escorts Olivia to Basil’s residence and the two meet the detective. At first, Basil is reluctant, but when Olivia describes Fidget, Basil now realizes his chance to capture Ratigan. Basil and Dawson take Toby, Sherlock Holmes’s pet Basset Hound, to track Fidget’s scent, where they locate him in a toyshop stealing clockwork mechanisms and toy soldiers’ uniforms. Fidget later traps Olivia by ambushing her from inside a toy cradle. Basil and Dawson pursue Fidget, but become entangled and fall behind. While searching the shop, Dawson discovers Fidget’s checklist, to which Basil does some chemical tests to discover the list came from a riverfront near the Thames. Basil and Dawson disguise themselves as sailors and go into a tavern called the “Rat Trap” and follow Fidget to Ratigan’s headquarters. They are caught, and Ratigan’s hooligans tie them to a spring-loaded mousetrap connected with a Rube Goldberg machine laid out to kill them both. Ratigan sets out for Buckingham Palace, where Fidget and his accomplices kidnap the queen. Basil, along with Dawson, deduces the trap’s weakness and escape just in time, shortly after Dawson helps Basil out of a state of self-pity that he allowed himself into, thanks to Ratigan.
At Buckingham Palace, Ratigan forces Hiram to operate the toy Queen, while the real Queen is taken to be fed to Felicia, Ratigan’s pet cat. The toy Queen declares Ratigan the ruler of all Mousedom, and he announces his tyrannical plans for his new “subjects”. Just then, Basil, Dawson and Olivia save Hiram and the real Queen, and apprehend Fidget (along with Ratigan’s other henchmen). Basil seizes control of the mechanical queen, making it denounce Ratigan as a fraud and tyrant as it breaks apart. The crowd, enraged by Ratigan’s treason, start climbing on him and defeating his guards. Ratigan frees himself and escapes on his dirigible with Fidget, holding Olivia hostage. Basil, Dawson, and Hiram create their own craft with a matchbox and some small helium-filled balloons, held together by the Union Jack. Ratigan tosses Fidget overboard to lighten the craft, and then attempts to drive the dirigible himself. Basil jumps on to the dirigible to confront Ratigan, causing him to crash straight into the Big Ben clocktower.
Inside the clocktower, Basil manages to get Ratigan’s cape stuck on some gears and rescues Olivia and safely delivers her to Hiram. Ratigan, however breaks free and attacks Basil, eventually knocking him to the dirigible, until the clock bell strikes 10:00 and the sound of the bell sends Ratigan falling to his death, taking Basil with him. However, Basil manages to grab the wreckage of Ratigan’s dirigible and save himself from falling just in time. Back at Baker Street, Basil and Dawson recount their adventures, as well as the queen’s gratitude for saving her life. Afterwards, the Flavershams leave to catch their train. As Dawson tries to leave, a distraught new client solicits Basil’s help, with Basil noting that Dawson is his trusted associate, prompting Dawson to remain and assist Basil.