Charlie B. Barkin the German Shepherd/Collie mix (Charlie Sheen) welcomes his friend Itchy Itchiford the Dachshund (Dom DeLuise) to Heaven after the latter choked to death on a chicken drumstick. However, while Itchy embraces paradise, Charlie reveals he has grown bored since his death and wishes to return to Earth. Carface, Charlie's old enemy, and a Pit Bull/Bulldog mix (Ernest Borgnine), is also in Heaven, but he steals Gabriel's Horn. However, upon leaving Heaven and falling into the swirl cloud, Carface loses the Horn after he is sucked through an airplane's jet turbines. The dog angels are alerted of the Horn's theft by Annabelle, the head angel (Bebe Neuwirth), meaning the Pearly Gates will not be open for deceased dogs. After using some smooth talk and persuasion, Annabelle sends Charlie and Itchy to San Francisco, California to locate and retrieve the Horn. She gives them 1 miracle to use.
Upon arrival in the city, the two dogs discover they are ghosts, unable to interact with the physical world or be seen. The two go to a bar for dogs where Charlie falls in love with a pretty Irish Setter named Sasha La Fleur (Sheena Easton). Carface appears in a corporeal form, courtesy of a red dog collar created by a mysterious dog named Red (George Hearn). Charlie and Itchy gain some collars ,but, they will only work for a day and Charlie and Itchy will become ghosts again after that. However, it is revealed that Red is really a Hellcat planning to use the Horn to imprison and rule over the angels, and Charlie's collar will be used to manipulate him into gaining the Horn.
Charlie and Itchy meet Sasha and her adopted "kid": a lonely boy named David (Adam Wylie) who ran away from home because his stepmother and his dad are going to have a baby together, making David feel as if they don't love him anymore. He wishes to become a street performer. Charlie agrees to assist David, much to Sasha and Itchy's objections. On the way to a nearby entertainment spot, the group spot the Horn being taken into a police station. After a chaotic distraction, Charlie and his group retrieve the Horn, Carface failing to steal it from them. Charlie, however, starts to have second thoughts about returning to Heaven, and places the Horn in a tied-up lobster trap before kicking it into the dock to make sure nobody gets to it. The group go to the entertainment spot on Easy Street, with David and the dogs entertaining an audience with magic tricks, but a rainstorm and David tumbling into a fountain ruin the act, leaving him and the dogs with no money to earn.
