In 1947 Los Angeles, "toons" act in theatrical cartoon shorts as with live-action films; they regularly interact with real people and animals and reside in Toontown. Private detective Eddie Valiant and his brother, Teddy, once worked closely with them on several famous cases, but after Teddy was killed by a toon, Eddie lapsed into alcoholism, lost his sense of humor, and vowed never to help toons again.
R.K. Maroon, head of Maroon Cartoons, is anxious about the recent poor performances of one of his biggest stars, Roger Rabbit. He hires Eddie to investigate rumors about Roger's attractive wife, Jessica, being romantically involved with businessman Marvin Acme, owner of both Acme Corporation and Toontown. After watching Jessica perform at an underground nightclub, Eddie secretly photographs her and Marvin playing patty-cake in her dressing room, which he shows to Roger. Roger aggressively declares that he and Jessica will be happy, and flees.
The next morning, Marvin is discovered dead at his factory, and evidence points to Roger being responsible. While investigating, Eddie meets Judge Doom, Toontown's creepy superior court judge, and his police team, the Toon Patrol, a gang of toon weasels hired by Doom to find and arrest Roger. Doom has created a toxic substance called "Dip" that is capable of killing a toon. Eddie later runs into Roger's toon costar, Baby Herman, who believes Roger is innocent and that Marvin's missing will, which will give the toons ownership of Toontown, may be the key to his murder. In his office, Eddie finds Roger, who begs him to help exonerate him. Eddie reluctantly hides him in his sink when the weasels storm into his office to search Eddie, and then later in a local bar, where his girlfriend, Dolores, works. Jessica approaches Eddie and says that Maroon forced her to pose for the photographs so he could blackmail Marvin.
Doom and his weasel henchmen discover Roger at the bar, but he and Eddie escape with Benny, an anthropomorphic taxi cab. They lay-low in a movie theater, where Eddie tells Roger that a toon killed Teddy when they were investigating a bank robbery. As they leave with Dolores, Eddie sees a news reel detailing the sale of Maroon Cartoons to Cloverleaf, a mysterious corporation that bought the city's trolley network shortly before Marvin's murder. Eddie rushes to the studio to challenge Maroon, leaving Roger to wait outside, but Jessica incapacitates him and stows him in the trunk of her car. Maroon tells Eddie that he blackmailed Marvin into selling his company so he could sell the studio, then tearfully admits he only did so out of fear for the safety of the toons. Maroon is killed by an unseen assassin before he can explain the consequences of the missing will. Eddie witnesses Jessica fleeing the scene, and assuming she is the culprit, chases her into Toontown. Once he catches her, she reveals that Doom killed Marvin and Maroon and that the former gave her his will for safekeeping, but she discovered that it was blank. She and Eddie are then kidnapped by Doom and the Toon Patrol.
At the Acme factory, Doom reveals his plot to destroy Toontown with a machine loaded with Dip to build a freeway, the only way past Toontown since Cloverleaf has bought out Los Angeles' Pacific Electric Railway. Roger unsuccessfully attempts to save Jessica, and they are tied onto a hook in front of the machine's hose. Eddie performs an impromptu vaudeville act, causing the Toon Patrol to die laughing; he kicks their leader into the machine's dip vat, killing him. Eddie battles against Doom, who is flattened by a steamroller, but survives, exposing him as the very toon who killed Teddy. Eddie uses a toon boxing glove mallet that causes the machine to empty its Dip onto Doom, melting him.
The empty machine crashes through the wall into Toontown, where it is destroyed by a train. Toons run in to see Doom's remains, and Eddie discovers that Roger inadvertently wrote his love letter for Jessica on Marvin's will, which was written in disappearing/reappearing ink. Roger shocks Eddie with a joy buzzer, and Eddie gives him a kiss, having regained his sense of humor. Eddie happily walks to Toontown with Dolores, Roger, Jessica, and the other toons.