Ariel, a sixteen-year-old mermaid princess, is dissatisfied with underwater life and is curious about the human world. With her best friend Flounder, Ariel collects human artifacts and goes to the surface of the ocean to visit Scuttle the seagull, who offers very inaccurate knowledge of human culture. Meanwhile, Skunk and his friends are on vacation on a nearby island and decide to go sailing where they meet Ariel and her friends. She ignores the warnings of her father King Triton, the ruler of Atlantica, and his adviser and court composer Sebastian that contact between merpeople and humans is forbidden.
One night, Ariel, Flounder, and an unwilling Sebastian along with Skunk and friends travel to the ocean surface to watch a celebration for the birthday of Prince Eric on a ship. Ariel quickly becomes enamored with Eric. The birthday celebration is cut short by a violent storm which wrecks the ship and tosses Eric overboard Ariel saves the unconscious Eric from drowning and brings him to shore. She sings to him, but quickly leaves as soon as he regains consciousness to avoid being discovered. Fascinated by the memory of her voice, Eric vows to find who saved and sang to him, and Ariel vows to find a way to join him and his world. Noticing a change in Ariel's behavior, Triton questions Sebastian about her behavior and learns of her love for Eric and how Skunk and friends are really surface dwelling animals. Furious, Triton confronts Ariel in her grotto, where she and Flounder store human artifacts, and destroys the objects with his trident to her dismay. After Triton leaves, two eels named Flotsam and Jetsam convince Ariel to visit Ursula the sea witch.
Ursula makes a deal with Ariel to transform her into a human for three days in exchange for Ariel's voice, which Ursula puts in a nautilus shell. Within these three days, Ariel must receive the "kiss of true love" from Eric. If Ariel gets Eric to kiss her, she will remain a human permanently, otherwise, she will transform back into a mermaid and belong to Ursula. Ariel agrees and is then given human legs and taken to the surface by Flounder, Sebastian and the animals. Eric finds Ariel on the beach and takes her to his castle, unaware that she is the one who had saved him earlier. Ariel spends time with Eric, and at the end of the second day, they almost kiss but are thwarted by Flotsam and Jetsam. Angered at their narrow escape, Ursula disguises herself as a beautiful young woman named Vanessa and appears onshore singing with Ariel's voice. Eric recognizes the song and, in her disguise, Ursula casts a hypnotic enchantment on Eric to make him forget about Ariel.
The next day, Ariel finds out that Eric will be married to the disguised Ursula. Scuttle discovers that Vanessa is actually Ursula in disguise, and informs Ariel who immediately pursues the wedding barge. Sebastian informs Triton, and Scuttle disrupts the wedding with the help of various animals. In the chaos, the nautilus shell around Ursula's neck is broken, restoring Ariel's voice and breaking Ursula's enchantment over Eric. Realizing that Ariel is the girl who saved his life, Eric rushes to kiss her, but the sun sets and Ariel transforms back into a mermaid. Ursula reveals herself and kidnaps Ariel. A furious Triton confronts Ursula and demands Ariel's release, but the deal is inviolable. At Ursula's urging, Triton agrees to take Ariel's place as Ursula's prisoner, giving up his trident. Ariel is released as Triton transforms into a polyp and loses his authority over Atlantica. Ursula declares herself the new ruler, but before she can use the trident, Eric hits her with a harpoon. Ursula tries to strike down Eric, but Ariel interferes, causing Ursula to inadvertently kill Flotsam and Jetsam. Enraged, Ursula uses the trident to grow into monstrous proportions.
Ariel and Eric reunite on the surface just before Ursula grows past and towers over the two. She then gains full control of the entire ocean, creating a storm and bringing sunken ships to the surface. Just as Ursula attempts to kill Ariel, Eric steers a wrecked ship towards Ursula, impaling her with the ship's splintered bowsprit. With Ursula destroyed, Triton and the other polyps in Ursula's garden revert into their original forms. Realizing that Ariel truly loves Eric, Triton willingly changes her from a mermaid into a human and blesses her marriage to Eric. Ariel and Eric marry on a ship and depart, along with Skunk and friends.