In 1939 New Orleans, Charlie B. Barkin and his best friend Itchy Itchiford escape from the dog pound and return to their casino riverboat on the bayou, formerly run by Charlie himself and his business partner, Carface Caruthers. Refusing to share the profits with Charlie, Carface had been responsible for Charlie and Itchy getting committed to the pound and persuades Charlie to leave town with half of the casino’s earnings. Charlie agrees, but is later intoxicated and killed by a car pushed downhill by Carface and his assistant, Killer. Charlie is sent to Heaven by default despite not having done any good deeds in his life; a whippet angel explains to him that because dogs are inherently good and loyal, all dogs go to Heaven and are entitled to paradise. Charlie cheats death by stealing a gold pocket watch representing his life and winding it back. As Charlie descends back to Earth, the whippet angel tells him that he can never return to Heaven; when the watch stops again, he will be sent to Hell instead. However, as long as the watch continues to run, Charlie will be immortal.
After Charlie reunites with Itchy and plots revenge in the form of a rivaling business, they discover that Carface has kidnapped a young orphaned girl named Anne-Marie for her ability to talk to animals, which proves advantageous when betting on races. Charlie rescues her and promises to feed the poor and help her find a family. The next day at the race track, Charlie steals a wallet from a couple as they talk to Anne-Marie and become alarmed by her ragged appearance. Charlie and Itchy use their winnings to build a successful casino in the junkyard where they live. Anne-Marie, upon realizing that she has been used, threatens to leave. To persuade her to stay, Charlie brings pizza to a family of poor puppies and their mother, Flo, at the old abandoned church. While there, Anne-Marie becomes angry at Charlie for stealing the wallet. As Charlie has a nightmare in which he is condemned to Hell, Anne-Marie returns the wallet to the couple, Kate and Harold. While they privately discuss adopting her, Charlie arrives and tricks her into leaving with him. Charlie and Anne-Marie narrowly escape an ambush by Carface and Killer and hide in an abandoned building, but the ground breaks and they fall into the lair of King Gator, a giant effeminate alligator. He and Charlie bond over a love of music and he lets them go, but Anne-Marie contracts pneumonia.
Carface and his thugs destroy Charlie’s casino and attack Itchy. An injured Itchy limps back to the church and confronts Charlie about his relationship with Anne-Marie, who Itchy thinks matters more than him. In his exasperation, Charlie loudly proclaims that he is using her and will eventually “dump her in an orphanage”. Anne-Marie overhears the conversation and tearfully runs away before she is kidnapped by Carface. Charlie follows them to Carface’s casino, where he is ambushed by Carface and his thugs. They fight with Charlie, inadvertently setting an oil fire that soon engulfs the whole structure. Charlie’s pained howls from their bites summon King Gator, who chases down and devours Carface. In the chaos, both Anne-Marie and the watch fall into the water. Unable to rescue both at the same time, Charlie rescues Anne-Marie and places her onto some driftwood and pushes her toward safety; however, the watch stops before he can reach it, ending his life, leading Killer to finish pushing her to shore. Sometime later, Kate and Harold adopt Anne-Marie, who has also adopted Itchy. Charlie, having sacrificed himself to save Anne-Marie, has earned back his place in Heaven, and is allowed to return in ghost form to reconcile with Anne-Marie. Leaving Itchy in her care, Charlie returns to Heaven, where Carface finally arrives and takes his own clock, vowing revenge against King Gator. As the whippet angel chases him and warns against using it, Charlie assures the audience that “he’ll be back” before winking and retrieving his halo.