The film begins with Pippi (Melissa Altro) sailing around the world with her father, Captain Efraim Longstocking (Gordon Pinsent), her pet horse, Old Man, her pet monkey, Mr. Nilsson, and various members of the ship's crew. One night during a hurricane, the captain is washed over board into the sea. As he drifts off, he calls to Pippi that he will "meet her in Villa Villekulla". To that effect, Pippi and her pet animals make their way home, Villa Villekulla, to await his return. Not long after arriving, she makes friends with the two children across the street — Tommy and Annika (Noah Reid and Olivia Garratt), who are captivated by her free spirit and fun-loving attitude. They soon convince her to go to school (for the first time in her life) where she gets into trouble, despite winning the hearts of her classmates.

Pippi also soon attracts the attention of a local social worker, Mrs. Prysselius (Catherine O'Hara)), who conspires to put her into foster care. When Miss Prysselius goes to speak with the local law enforcement of the need for the girl to be placed in a home for orphans, she lets certain details (her lack of adult supervision, living alone, and having a large supply of gold coins kept out in the open) be revealed to a pair of thieves already in jail. The thieves, Bloom and Thunder-Karlsson, decide to rob Pippi themselves once they break out of jail.

Pippi and her friends take part in many adventures and close-calls, winning over almost everyone, with the exception of Miss Prysselius and Tommy and Annika's parents. Just when Miss Prysselius has had enough and is about to drag Pippi straight to the children's home herself, Pippi's father returns to take her back to their life on the sea. However, Pippi decides that she can't leave her new friends and decides to stay in Villa Villekulla.

Pippi Longstocking arrives in a small Swedish town to take up residence in her Villa. The young girl lives with her companions, Horse and Mr. Nilsson (a monkey). All the townsfolk agree that the village will never quite be the same again. Annika and Tommy, Pippi's new neighbors, are excited about the adventures they are sure to share with their new friend; and the adults are certain that this eccentric little girl with her wild imagination, incredible strength and lack of parental supervision will cause no end of trouble.

Local crooks Thunder Karlson and Bloom are always looking for an easy and fast fortune. When they catch sight of Pippi's chest of gold, they are determined to get a share for themselves. Pippi proves to be more of an obstacle than they had bargained for.

Two city slickers decide they want to buy Villa Villekulla. Thunder Karlson and Bloom set themselves up as real estate agents and try to sell Pippi's house, without her knowledge or consent. Pippi appears to be playing along, but all the while she is on top of the game and gets everyone so confused that the city folk vow never to step foot in a small town again. Thunder Karlson and Bloom are escorted to jail.

Pippi finds a hot air balloon in the attic and decides to try it out with Annika and Tommy. They fly to the next town and inadvertently manage to assist in the capture of two crooks.

Captain Longstocking docks in the village to pick up Pippi and take her with him to the South Seas. Annika and Tommy are given permission to go along and they all set sail for adventure on the high seas. Pippi teaches the Settergren's about life on board, teaching them to be look-outs and how to manage a pirate attack. Unbeknownst to the Captain and crew, Thunder Karlson and Bloom are castaways yet again in search of their fortunes. Unfortunately, they get very sea sick and the fortune is not as easy to access as they had hoped.

When the Hoptoad docks on an exotic island, Pippi, Tommy and Annika are left in charge of the Island pearls. They have to use their wits and strength to outsmart a pair of Pearl Poachers. They travel the island foraging over the waterways and jungle to protect the pearls and their won safety.

Following their stay on the exotic island it is time to go home. After rescuing Thunder Karlson and Bloom from a deserted island they set sail for home. En route they encounter many difficulties at sea including a windless channel and a tidal wave, until finally they are washed up on an unknown land. After settling this new continent they discover that perhaps they've seen this land before.

It is winter in the village and all the town is involved in winter sports. Each year there is a ski race between neighboring villages. Bengt the Bully challenges Pippi and we get the opportunity to see Pippi's skiing skills put to the test.

The local horse show attracts the very finest horses. Pippi decides to enter Horse. After much humiliation from the other contestants, and to the horror of Mrs. Prysselius, Horse comes through it all with flying colours. Although unconventional, he performs much better than the rest.

Thunder Karlson and Bloom consult a Criminal Manual in hopes of accomplishing the perfect crime and getting Pippi's gold. The Manual offers a lot of creative ways to carry out a crime. However, the Manual obviously didn't take into account Pippi Longstocking and her eccentric habits.

Tommy and Annika are intrigued and their curiosity peaked by Pippi's tales of personal encounters with shipwrecks. They consider Pippi very lucky and their own lives quite boring. She tells them not to despair. If it's a shipwreck they want, then they'll just go find one right that very day. Pippi pulls a rowboat out of the sea, proceeds to repair it and they set off to encounter a shipwreck.

When the Old Folks Home is being torn down and replaced by a newer, colder, less humane structure, Pippi comes to the rescue of the town's senior citizens. Not only does she prove that you can fight City Hall, but she also manages to save the lives of the Chairman's children in the process as the new building comes tumbling down.

Annika and Tommy introduce Pippi to a local custom, the annual town fair. It is all a bit confusing to Pippi and she has her own unique interpretation for everything she encounters, including the fire breather, snake charmer, card reader, bumper cars and Ferris wheel. When Adolphe, the world's strongest man, challenges to take on anyone, he is not aware that Pippi Longstocking is in the audience. He regrets the challenge.