A little girl falls asleep while reading a fairy tale about a dragon that held a princess captive in a castle. Her stuffed toys—a boy doll, a horse, and a dog, all made of calico—are profoundly moved by this story and vow to save the princess. The doll mounts the horse and uses a candy cane for a spear. They charge off into a land of calico, where they encounter various adorable calico animals before finally having to do battle with the calico dragon.
- All Just a Dream: Sure enough, the story is a dream the little girl had after falling asleep while reading her story.
- Call-Back: The dragon's tongue unrolls in a manner peculiarly like a party horn. The ending reveals that the girl is actually dreaming about how the curtains of her window sound like when the wind is blowing in.
- Eat Me: The dog ends up getting eaten by the dragon when it gets caught in the dragon's extendable tongue. However, due to it being made of cloth, the dog is able to bust out the other side, and ends up with the dragon's tongue. The dog then uses the tongue to defeat the dragon.
- Living Toys: The toys come to life and go charging off to fight a dragon.
- Multiple Head Case: The calico dragon has three heads, which like to talk with each other.
- Narrator: A singing narrator that sings about the "three brave little comrades" going off to fight a dragon.
- Puppy-Dog Eyes: The girl has big round cute eyes.
- Villain Song: The dragon makes its entrance with a song talking about how it likes to eat people.