The film is set in 1947 Los Angeles, where “toons” act in theatrical cartoon shorts as with live-action films. They regularly interact with real people and animals and reside in Toontown. Private detective Eddie Valiant and his brother, Teddy, once worked closely with them on several famous cases, but after Teddy was killed by a toon while the duo was investigating a bank robbery, Eddie lapsed into alcoholism, lost his sense of humor, and vowed never to help toons again.
R.K. Maroon, head of Maroon Cartoons, is anxious about the recent poor performances of one of his biggest stars, Roger Rabbit. He hires Eddie to investigate rumors about Roger’s attractive wife, Jessica, being romantically involved with businessman Marvin Acme, owner of both Acme Corporation and Toontown. After watching Jessica perform at an underground nightclub, Eddie secretly photographs her and Marvin playing patty-cake in her dressing room, which he shows to Roger. A heartbroken Roger aggressively declares that he and Jessica will be happy again, and flees.
The next morning, Marvin is discovered to have been killed by a falling safe at his factory, and evidence points to Roger being responsible. While investigating, Eddie meets Judge Doom, Toontown’s sinister superior court judge, and his police team, the Toon Patrol, a gang of toon weasels hired by Doom to find and arrest Roger. Doom has formulated a solvent mixture called “Dip” that is capable of killing the otherwise invulnerable toons. Eddie later runs into Roger’s toon co-star, Baby Herman, who believes Roger is innocent and that Marvin’s missing will, which will give the toons ownership of Toontown, may be the key to his murder. In his office, Eddie finds Roger, who begs him to help exonerate him. Eddie reluctantly hides Roger when the weasels storm into his office to search for him, and then later in a local bar, where his girlfriend, Dolores, works. Jessica approaches Eddie and says that Maroon forced her to pose for the photographs so he could blackmail Marvin by threatening to ruin Roger’s career.
Doom and his weasel henchmen discover Roger at the bar, but he and Eddie escape with Benny, an anthropomorphic taxi cab. They hide in a movie theater, where Eddie sees a newsreel detailing the sale of Maroon Cartoons to Cloverleaf, a mysterious corporation that bought the city’s Pacific Electric streetcar system shortly before Marvin’s murder. Eddie rushes to the studio to interrogate Maroon, leaving Roger to wait outside, but Jessica knocks him out and stows him in the trunk of her car. Maroon tells Eddie that he blackmailed Marvin into selling his company so he could sell the studio, then admits he only did so out of fear for the safety of the toons. Maroon is killed by an unseen assassin before he can explain the consequences of the missing will. Eddie witnesses Jessica fleeing the scene and, assuming she is the killer, chases her into Toontown. Once he catches her, she reveals that Doom killed Marvin and Maroon and that the former gave her his will for safekeeping, but she discovered that it was blank. She and Eddie are then kidnapped by Doom and the Toon Patrol.
At the Acme factory, Doom reveals that he has learned of the city’s plan to build a freeway and intends to profit from it. As the only stockholder of Cloverleaf, he bought the streetcar system in order to shut it down and will use a machine loaded with Dip to destroy Toontown, allowing him to sell the land to roadside businesses. Roger unsuccessfully attempts to save Jessica and they are tied onto a hook in front of the machine’s hose. Eddie performs an impromptu vaudeville act, causing the Toon Patrol to die laughing; he kicks their leader Smartass into the machine’s dip vat, killing him. Eddie battles Doom, who is flattened by a steamroller, but somehow survives, exposing him as the very toon who killed Teddy. Eddie uses a toon boxing glove mallet that causes the machine to empty its Dip onto Doom, melting him.
The empty machine crashes through the wall into Toontown, where it is destroyed by a train. Toons run in to see Doom’s remains and Eddie reveals him to the arriving police officers as Teddy, Marvin, and Maroon’s killer, thus clearing Roger’s name. Eddie discovers that Roger inadvertently wrote a love letter for Jessica on Marvin’s will, which was written in disappearing/reappearing ink. With the city now officially belonging to the toons, Eddie, having regained his sense of humor, happily walks into Toontown with Dolores, Roger, Jessica, and the other toons.