In a world where toys come to life when humans aren't looking, Woody, a pull-string cowboy doll, enjoys his position as the favorite toy of a young boy named Andy. Woody's leadership and care for Andy's room full of toys is evident, as he orchestrates recon missions to discover Andy's new birthday gifts and reassures the other toys of their place in Andy's heart. Andy's toys live a peaceful life of play and companionship, their existence predicated on the love and attention that they receive from their owner.

The harmony of toy life is disrupted when Andy receives a new action figure, Buzz Lightyear, a space ranger who doesn't realize that he's a toy and believes he's on an intergalactic mission. Buzz's advanced features, complete with lights and sounds, quickly make him a new favorite, sparking jealousy in Woody. As Andy's affection shifts toward Buzz, and with the family preparing to move to a new house, Woody's place as top toy seems threatened. His attempts to regain his status inadvertently set off a chain of events that lead him and Buzz into the outside world, where the two toys have to confront the reality away from the safety of Andy's room.