Skunk and friends travel to Antarctica, where they meet Hubie, a shy, gullible, but kindhearted penguin, is in love with the female penguin Marina, who also likes him, but he lacks self-confidence leading him to be bullied by a much more impressive, but vain and cruel penguin named Drake, who also wants Marina. One night, Hubie and Marina manage to confirm how they feel for each other, but Hubie cannot quite find a perfect pebble to propose to Marina with. He wishes on a star to make his dream come true and he receives a beautiful emerald cube (whom he mistook it for a pebble) from the sky. Ecstatic, Hubie rushes to find Marina but is stopped by Drake. When Drake demands Hubie to give him the emerald, Hubie refuses and Drake throws him into the water. Hubie narrowly escapes from a leopard sealand climbs onto a piece of ice where he is swept away from Antarctica. In order to find their new friend, Panda sends their two new members Crysta and Batty to follow the iceberg Hubie's on.
Hubie who was asleep for three days, is picked up by humans and caged on their ship called "Misery", transports penguins to a zoo and meets a tough, grumpy, streetwise and somewhat arrogant but good-hearted rockhopper penguin named Rocko (James Belushi). After seeing in a vision Marina having a dilemma, Hubie decides to escape with Rocko and flees, before laying low on a beach where he is soon reunited with Batty and Crysta. Rocko reluctantly tells Hubie about his desire to fly and live in tropical climate. He convinces him to help him return to Antarctica by making up a lie about a flying penguin named Waldo. They have a short fight after Rocko tries to fly off "an authentic, ancient aviarial airstrip" and another after Rocko saved Hubie from a killer whale. Back in Antarctica, Drake begins to threaten Marina for her hand in mating. If Marina refuses, she will be forced to leave, as it goes against tradition. It is there Baboon appears before Skunk and friends, revealing that he's working for Drake. Hubie and Rocko attempt to depart, but Rocko discovers Hubie lied to him and attempts to attack Hubie, but soon starts laughing, praising Hubie's determination to get back to Marina. Back in Antarctica, Marina becomes worried about Hubie. Hubie and Rocko run into the hungry and persistent leopard seal but are able to escape it. With that they become true friends (though it takes prodding along with a musical number from Hubie for Rocko to admit it). Their joy is short-lived as three killer whales attack them causing Hubie's pebble to get lost in the scuffle and Rocko to go missing, leaving Hubie and the others to think he perished.
Disheartened, Hubie and friends continue on to face Drake and defeats him in a fight, while Skunk and friends fight Baboon. Rocko, who survives the killer whale attack, finds Hubie and Marina at Drake's tower. As Hubie makes a proposal to Marina and gains her acceptance, Drake returns to finish the three off. Hubie, Rocko, and Marina dodge the giant boulder which lethally crushes Drake in his collapsing tower, which causes a crack in the ice and Baboon falls in and is frozen solid and begins to float away with his Ninja Monkeys. During the escape, Rocko's dream for flight comes true as he flies himself, Hubie, and Marina to safety. Rocko hands Hubie his emerald. He presents it to Marina, who loves it, but loves Hubie more. Rocko remains in Antarctica with Hubie and Marina, and sometime later, he teaches their children how to fly.