Based on Victor Herbert's operetta and also known as March of the Wooden Soldiers, Ollie and Stannie help save Little Bo Peep from the clutches of the landlord Barnaby.
Barnaby (Henry Brandon) asks to marry Little Bo Peep (Charlotte Henry) and threatens her; but she says never. Barnaby demands the mortgage payment from her mother Widow Peep (Florence Roberts). Ollie Dee (Oliver Hardy) and Stannie Dum (Stan Laurel) may be turned out if they can't come up with some money; but Stannie spent Ollie's savings on a toy pee wee. Ollie thinks he can borrow it from their boss at the toy factory; but he gets angry and fires them for making 100 toy soldiers six feet high instead of 600 one foot high. Mother Goose (Virginia Karns) and various fairy tale characters help Bo Peep look for her lost sheep. Barnaby offers the mortgage if Bo Peep will marry him, but she is going to marry Tom-Tom Piper (Felix Knight).
Stannie takes Ollie in a box to Barnaby as a Christmas present; but they stupidly say good-night to each other and are put in the stocks for burglary. Ollie is dunked in the pool. When Bo Peep agrees to wed Barnaby, he drops the charges. Stannie is so upset about the marriage that he is "housebroken." Widow Peep pleads with Barnaby to no avail. At the wedding Ollie rips up the mortgage, as the bride is revealed as Stannie. Ollie tells him he must stay with Barnaby; but Stannie says he does not love him and cries. Tom-Tom sings to Bo Peep that he'll take her to Spain.
Barnaby "pignaps" on of the three pigs whose house is straw in order to frame Tom-Tom, who is banished to Bogeyland by King Cole. Ollie and Stannie find the pig Elmer in Barnaby's cellar. The guilty Barnaby hides in the well, while Bo Peep goes to Tom-Tom, who sings her to sleep. Barnaby grabs Bo Peep and fights with Tom-Tom. Barnaby rouses the Bogeymen, and Tom-Tom and Bo Peep run away. Ollie and Stannie catch Barnaby but run from the Bogeymen and climb out of the well. Toyland celebrates the rescue of Tom-Tom and Bo Peep; but Barnaby attacks Toyland with the Bogeymen. Ollie throws darts at them, and Stannie bats them. Then they send the wooden soldiers against the Bogeymen to drive them out. In the final scene Stannie shoots a cannon-load of darts into the rear end of Ollie.
Slapstick humor punctuates this children's fantasy. The selfish landlord tries to manipulate the poor but cannot win their affection. The ugly Bogeymen are defeated by an impersonalized army of automatons, society's foolish answer to subconscious fears.