In Brazil, various exotic birds are smuggled out of the country. In Moose Lake, Minnesota, a crate with a male blue macaw hatchling falls out of a truck and is found by a little girl named Linda Gunderson, who names him Blu. Fifteen years later, Linda owns a bookstore. Blu, highly domesticated and unable to fly, is ridiculed frequently by the Canada Geese that come by the outside of Linda's bookstore.
One day, ornithologist Túlio Monteiro invites Blu and Linda to Rio de Janeiro on the condition that Blu, who is the last male of his species, mates with a female macaw. Linda accepts and they fly to Rio, where Blu meets a Red-crested Cardinal named Pedro and his Yellow Canary friend Nico. At Túlio's aviary, Blu falls in love with Jewel, a confident and independent blue macaw longing to flee into the wilderness. The macaws are captured by Fernando, an impoverished orphan boy, and a Sulphur-crested Cockatoo named Nigel, both of whom work for a group of smugglers led by Marcel. While Fernando has second thoughts about his actions, Nigel tells the macaws that he vowed to smuggle exotic birds in revenge after his role on a television program had been replaced by one. However, because of Blu's familiarity with cages, the macaws are able to flee into a jungle.
Fernando meets Linda and Túlio and helps them find the birds, while Blu and Jewel meet a Toco Toucan named Rafael, who offers to take them to his bulldog friend Luiz to remove their leg chain. He tries to teach Blu how to fly, before they meet up with Pedro and Nico. Nigel hires a horde of thieving marmosets to capture Blu and Jewel. Pedro and Nico take Blu and Jewel to a bird's Rio-style party, where they perform a duet, but encounter the marmosets right before the macaws are about to kiss. Their bird friends fight them off while Blu's group escapes. Fernando takes Linda and Túlio to the smugglers hideout, where they discover that the birds have already been moved out. Marcel, wanting to leave the country as soon as possible to secure a black market deal regarding Blu and Jewel, explains that he will use the Rio Carnival parade to smuggle the birds to the airport, as all the other streets have been blocked off for the festivities.
Meanwhile, Blu and the others meet Luiz, who releases the chain holding Blu and Jewel. Blu, thinking that his inability to fly will only be a burden to Jewel, argues with Jewel before going their separate ways. Pedro and Nico witness Nigel capturing Jewel. When Blu and Rafael learn from Pedro and Nico that Nigel captured Jewel, they rush to the carnival to rescue her. Meanwhile, Linda and Túlio have spotted the smuggler's parade float and organize a rescue attempt for the birds.
As Linda and Túlio pose as dancers in blue macaw costumes, Nigel captures Blu and the group. Linda and Túlio fail to stop the smugglers on time and Marcel's group takes off in a Short SC.7 Skyvan. On board, Blu destroys his cage using his fire hydrant and releases Jewel. The macaws release the captive birds, but Nigel injures Jewel. Blu sends Nigel flying into the plane engine using the now active fire extinguisher, and the smugglers flee the plane. Unable to fly, Jewel falls out of the plane's open cargo hatch towards the ocean. Jumping out of the plane to rescue her, Blu finally discovers that he is able to fly after sharing a brief kiss with Jewel. Blu carries her back to Linda and Túlio for help. Later, Linda and Túlio adopt Fernando, heal Jewel, and organize a sanctuary to protect the jungle from smugglers. Blu and Jewel raise three baby birds together and celebrate with their bird friends, Nigel is ridiculed for his loss of feathers, and the smugglers are sent to jail.
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