Conrad and Sally Walden live in the city of Anville with their single mother, Joan Walden. Joan works for neat-freak Hank Humberfloob, and is hosting an office party at her house. One day, she is called back to the office, leaving the kids with Mrs. Kwan, a tired babysitter, and forbidding them to enter the living room, which is being kept pristine for the upcoming party. Joan is also dating their next-door neighbor, Larry Quinn, much to Conrad's dismay. Larry is constantly on the lookout for any mischief Conrad may be up to, as he wants nothing more than to send him away to military school, as Conrad has earned the reputation of "trouble-maker", while his sister is characterized as "perfect and well-behaved".
Once their mother leaves, Sally and Conrad discover a humanoid, oversized talking cat in a hat in their house. The cat wants them to learn to have fun, but the children's pet fish doesn't want the cat around when Joan is away. The Cat ruins Joan's best dress, jumping on the living room's couch, and baking cupcakes that explode. In the process, he even releases two trouble-making things, Thing 1 and Thing 2, from a crate that he explains is actually a portal from their world to his world. The Cat tells Conrad that he only has one rule: never open the crate, then allows the Things to have fun, but they then release their true colors by making a mess out of the house. Despite the Cat's warning, Conrad picks the lock anyway. When the crate's lock attaches itself to the collar of the family dog, Cat and the kids must go find it. They drive a super-powered car in search of the dog and use Cat's magic hat to their advantage, but face an obstacle when he loses it at one point.
Meanwhile, Larry is revealed to be an unemployed, disgusting slob with false teeth and is in financial ruin, having been showing off the impression that he's a successful businessman in the hopes of marrying to Joan and sponging off of her. Larry sees Nevins running across the street and soon becomes wise to all of this and tracks down Joan to tell her, but Things 1 and 2 have stalled her on the road, posing as police officers. Larry is fed up about this, so he goes back to the house, telling Joan to meet him there.
By the time the kids and the Cat return to the house with the lock, all has broken loose, with "the mother of all messes" emitting from the unlocked crate and entering the house. They manage to navigate their way through the oversized house and find the crate sucking up things that disappears forever once gone through, after Sally is nearly sucked up but holding onto Conrad, Sally has to put her trust into Conrad that he will catch her when he lets go of her hand and puts the lock back on the crate. The plan works. The house returns to its normal proportions but then immediately falls apart. The Cat then tells the kids that he planned the whole day, including making not opening the crate his one rule, as he knew Conrad could not resist and also admits he never really lost his magic hat. The kids angrily tell the Cat to leave the house. However, the Cat happily returns to clean up his mess with a great cleaning contraption much to Conrad and Sally's surprise and delight. Afterwards The Cat says good-bye to Conrad and Sally as they plead him not to go but he departs as Joan is coming in. Larry arrives when all is restored, thinking he has busted the kids, but when Joan sees the clean house, she doesn't believe Larry, and asks him to leave. When her party is successful, Joan and her kids play in the living room by jumping on the couch and having fun.
The film ends as the Cat and Thing 1 and Thing 2 walk into the sunset.