Trapped in Sid's room, the other toys fix Buzz's broken arm but can't stop Sid strapping Buzz to a rocket. The launch is delayed due to rain.
Woody has been shunned by Andy's toys, and is trapped inside a plastic crate held down by a heavy toolbox. A depressed Buzz, who earlier realised that he was in fact just a toy, suddenly gets inspired by Woody's honest revelation that he was jealous, and frees his friend -- but Sid wakes up and takes Buzz outside before they can escape.
Woody asks Sid's toys for help and together they hatch a plan. They know they must break a few rules.
First they get Scud, Sid's dog, thrown out the house and then ride out into the garden to save the spaceman. Sid picks up Woody when he hears the familiar voice, but suddenly Woody starts talking directly to Sid - and warns him about what will happen if he continues to torture his toys. Buried and damaged toys emerge from the ground.
Sid panicks and runs back inside the house - where he is even taunted by his little sister.
Buzz and Woody can't get into Andy's car in time, but board the moving van - only to be attacked by Scud. Buzz saves Woody's life, and is left behind. Woody takes RC out the box, and sends him out to pick up Buzz. The others think Woody has gone mad and throw him overboard.
Buzz and RC pick up Woody and they race to the truck - but RC's batteries give out and again they are left behind. Suddenly Woody has an idea - he uses Buzz's helmet to concentrate the sun's rays onto the rocket fuse. The rocket fires up and sends them hurtling towards the truck again - they lift off the ground and RC is thrown into the back.
Buzz and Woody take off into the air - but before the rocket can explode Buzz releases his wings to cut the tape, and they glide down - past the truck, and land in Andy's car.
A little later, in their new home, Sarge and the army men are again sent to find out about Andy's new presents. Both Buzz and Woody appear a little apprehensive. Suddenly we hear a dog bark from the other room -- it's worse than a Buzz Lightyear, and not normally recommended for Christmas, but Andy is now the proud owner of a new puppy!