In a city of anthropomorphic animals called Calatonia, theater owner koala Buster Moon hosts a singing competition to promote his struggling theater, following financial problems brought up by bank representative llama Judith. A mishap involving the glass eye of Buster's assistant, elderly iguana Miss Crawly, applies two extra zeroes to the prize money, and the misprinted flyers are blown out the window into the street.
Animals from across the city gather for auditions. Those selected include: housewife and mother of 25 piglets Rosita; punk-rock porcupine Ash; gorilla Johnny, son of mobster Big Daddy; street musician mouse Mike; singing and dancing frog trio Ricki, Howie, and Kai; and opera singer camel Pete. Teenage elephant Meena fails her audition from stage fright, while Ash's ill-tempered boyfriend Lance is dismissed from the contest. Rosita is paired with an exuberant pig named Gunter for a dance routine. Buster discovers the flyers advertise a prize of $100,000 – money he does not have – but remains optimistic. He arranges a visit with his friend Eddie's grandmother, former opera singer and stage actress Nana Noodleman, who is hesitant to sponsor the prize money but agrees to attend a private preview of the show.
Pressured by her grandfather, Meena tries to ask Buster for another chance to perform, but becomes his stage hand instead. When the frog trio breaks up and quits and Pete is injured, Meena is added as an act (despite the fact that Buster hasn’t heard her sing). Rosita flounders in her dance routine with Gunter, distracted by her parenting duties that have fallen into disarray. After discovering Lance broke up with her for a new girlfriend, telling her that she was never around anymore, and evicting them from her apartment, Ash breaks down while singing her assigned song, Carly Rae Jepsen's "Call Me Maybe." Johnny is torn between rehearsals and having to help his father as the driver of a getaway car in a heist. Trying to do both, he fails to pick up the robbers in time due to a traffic jam, and his father and his gang are arrested. Meena does not get any help in overcoming her stage fright, and Mike, certain the prize money is as good as his, buys a fancy car to impress a female mouse and swindles a group of bears in a card game.
The day of the preview, the bears interrupt the show, demanding the money from Mike, who points to Buster. The bears open the prize chest, but it is nowhere near $100,000. The glass tank of luminescent squids lighting the stage breaks and floods the theater, which comes crashing down. Judith repossesses the lot and Buster, who had been living in his desk at the theater, takes up residence with Eddie at his parents' pool house. The contestants try to cheer him up, but Buster is too despondent to listen. He tries to start over by opening a car wash.
When Meena goes to the rubble of the theater and sings Leonard Cohen's "Hallelujah", Buster hears her and is inspired to reinstate the show without the prize money, performing on a makeshift stage on the lot for Rosita and Meena's families. Rosita and Gunter perform Taylor Swift's "Shake It Off", which finally prompts Rosita's husband, Norman, to pay attention to her singing talent. More animals are drawn to the scene as the show is broadcast on the news. Johnny's rendition of Elton John's "I'm Still Standing" impresses his father, who escapes from prison to reconcile with him and apologize. Despite an interruption by Judith, Ash sings her original rock song "Set It All Free," which her ex-boyfriend watches on TV and finally acknowledges Ash's talent. Mike returns to the show and sings Frank Sinatra's "My Way,” and Meena finally overcomes her fears and sings Stevie Wonder's "Don't You Worry 'bout a Thing", which literally brings down the house.
The show is a success and impresses Nana, who was in the audience. She buys the lot and the theater is rebuilt and reopened.