Babe, an orphaned piglet, is chosen for a "guess the weight" contest at a county fair. The winning farmer, Arthur Hoggett, brings him home and allows him to stay with a Border Collie named Fly, her mate Rex and their puppies, in the barn.
A duck named Ferdinand, who poses as a rooster to spare himself from being eaten, persuades Babe to help him destroy the alarm clock that threatens his mission. Despite succeeding in this, they wake Duchess, the Hoggetts' cat, and in the confusion accidentally destroy the living room. Rex sternly instructs Babe to stay away from Ferdinand (now a fugitive) and the house. Sometime later, when Fly's puppies are put up for sale, Babe asks if he can call her "Mom".
Christmas brings a visit from the Hoggetts' relatives. Babe is almost chosen for Christmas dinner but a duck is picked instead after Arthur remarks to his wife Esme that Babe may bring a prize for ham at the next county fair. On Christmas Day, Babe justifies his existence by alerting Arthur to sheep rustlers stealing sheep from one of the fields. The next day, Arthur sees Babe sort the hens, separating the brown from the white ones. Impressed, he takes him to the fields and allows him to try and herd the sheep. Encouraged by an elder ewe named Maa, the sheep cooperate, but Rex sees Babe's actions as an insult to sheepdogs and confronts Fly in a vicious fight for encouraging Babe. He injures her leg and accidentally bites Arthur's hand when he tries to intervene. Rex is then chained to the dog house, muzzled and sedated, leaving the sheep herding job to Babe.
One morning, Babe is awakened by the sheep's cries and sees three dogs attacking them. Though he manages to scare them off, Maa is mortally injured and dies as a result. Arthur arrives and, thinking that Babe killed her, prepares to shoot him. Fly is so anxious to find out whether he is guilty or innocent that, instead of barking orders at the sheep, she talks to them to find out what happened. Learning the truth, she barks to distract Arthur, delaying him until Esme mentions that the police say feral dogs have been killing sheep on neighboring farms and asks him why he has taken his rifle out.
When Esme leaves on a trip, Arthur signs Babe up for a local sheepherding competition. As it is raining the night before, Arthur lets him and Fly into the house. However, Duchess scratches him when he tries to speak to her, so Arthur immediately confines her outside. When she is let back in later, she gets revenge on Babe by revealing that humans eat pigs. Horrified, he runs out to the barn and learns from Fly that this is true. The next morning, Fly discovers that Babe has run away. She and Rex alert Arthur and they all search for him. Rex finds him in a cemetery and Arthur brings him home. However, he is still demoralized and refuses to eat. Arthur gives him a drink from a baby bottle, sings to him "If I Had Words" and dances a jig for him. This restores Babe