Two imaginative elementary school pranksters, George Beard and Harold Hutchins, are best friends who share a penchant for comic books and creating their own superhero stories. At their tyrannical school, led by the grumpy Principal Benjamin Krupp, their creative antics are anything but appreciated. George, the storyteller, and Harold, the illustrator, spend their days crafting comic books and dreaming up pranks, with their greatest creation being the superhero Captain Underpants. Principal Krupp, who has a deep-seated vendetta against fun, especially George and Harold's, is determined to catch them in the act and put an end to their shenanigans once and for all.

During one of their elaborate pranks that goes too far, the boys get caught on tape. Faced with the nightmare of being placed in separate classes, which would effectively end their partnership in fun and creativity, they accidentally hypnotize Principal Krupp with a 3D Hypno Ring they got out of a cereal box. The hypnosis works surprisingly well, so much so that Krupp believes he is the real-life embodiment of Captain Underpants, the boys' own comic book creation. With Krupp now transformed into the blissfully ignorant and overly enthusiastic superhero, George and Harold have the time of their lives running the school with their principal under their spell, completely unaware of the chaos that is about to unfold.