Yugo, an adventurous and brave young girl, runs away from home after being scolded by her father. She returns to the fantastical kingdom in the clouds to find her friends Lala and Uncle Bear. Just as they’re celebrating their reunion, a crisis breaks out: all living creatures in the kingdom are shrinking! Mr. Potato, the chief of the rodents, had learned from an ancient prophecy that the water will dry up and shrink the kingdom's animals. Believing the legend, he and his tribesmen have stored their own secret supply of water with which they are able to control and enslave all the other animals. With the help of Mr. Potato’s son, Mili, Yugo, Lala and Uncle Bear realize that the crisis can be resolved if they can only find the water's source. They embark on a perilous journey to save the kingdom, befriending the Big Face Monsters, the kingdom's ancient behemoths. At the crucial moment, his son Mili’s strong sense of justice moves Mr. Potato to let go of his hatred and help defend their beautiful homeland. The experience changes Yugo's perception of her own over-protective father. And Lala understands his love and courage can protect the kingdom and accepts to be the new chief.