A bizarre man-child, Pee-wee Herman, loves his bike more than anything else in the world and refuses to sell it to Francis Buxton, a fellow man-child and neighborhood "rich kid". The bike is stolen after Pee-wee visits a magic shop, ensuing into a high-profile campaign to find it. To grip with his insanity of the missing bike, Pee-wee visits a false psychic who lies and tells him that the bike is hidden in the basement of the Alamo. Pee-wee hitches a ride with a man named Mickey, a fugitive on the run from the law because he cut off a "do not remove under the penalty of law" mattress tag. Mickey abandons Pee-wee after Pee-wee nearly kills the two of them by accident.
Pee-wee is picked up by Large Marge, learning at a truck stop diner that Large Marge was actually a ghost. Pee-wee meets Simone, a friendly waitress with a yearning to see Paris. Her huge boyfriend Andy thinks Pee-wee and Simone were romantically linked, chasing Pee-wee and causing him to flee in a boxcar of a moving train. Making it to San Antonio he finds that the Alamo has no basement, realizing his whole trip was a sham and goes to the bus station to return home. On his journey he breaks the world record for bull-riding and runs afoul of a biker gang (after accidentally knocking over their motorcycles). Fearing they are trying to kill him, Pee-wee dances to "Tequila" and wins the respect of the bikers. The bikers give him a motorcycle, but Pee-wee quickly crashes it, being sent to the hospital. Pee-wee learns from the television that his bike now belongs to Kevin Morton, a child star who is currently filming a movie with the bike as a prominent prop.
Pee-wee sneaks into Warner Brothers Studios in Burbank, California and locates the set on which Kevin is acting. Pee-wee disguises himself as a nun in order to infiltrate the set and steal his bike back. In a wild chase scene, he flees from the Warner Bros. security staff through a variety of sets. Various actors and props, including a boat-shaped car, a Santa Claus sleigh, and a man in a Godzilla costume, get swept into the chase. He also interrupts the shooting of a Twisted Sister music video for "Burn in Hell" from Stay Hungry. Using the gadgets on his bike, Pee-wee manages to evade the guards and escape the studio. As he blissfully rides away, however, Pee-wee discovers a pet shop in flames. After heroically saving all the animals (even the snakes which creep him out), Pee-wee faints on the store's doorstep, just as the fire department and police arrive. When emergency medical technicians come to revive Pee-wee, a fireman gets in an argument with a policeman, because the firefighter considers Pee-wee a hero, but the police officer places Pee-wee under arrest.
Pee-wee escapes from Warner Bros. in a climactic chasePee-wee is brought before a Warner Bros. studio executive who offers to buy Pee-wee's life rights in exchange for dropping all charges. Pee-wee agrees and attends the premiere at his local drive-in. All of the friends Pee-wee made during his trip come to see the film, and Pee-wee greets each of them. He ends with Dottie, having finally fulfilled her demands for a date at the drive-in. As a final act of vengeance, Pee-wee allows Francis to sit on his bike, who triggers the ejector seat and sends him flying. Pee-wee's movie turns out to be a cheesy James Bond-style action film involving James Brolin and Morgan Fairchild fighting ninjas. Pee-wee has a cameo appearance as a bellhop, but his voice is comically dubbed over. After watching for a few minutes, Pee-wee decides to leave, having already lived the real story. Rejoined with his bike, he rides away with best-friend Dottie, happily ever after.