The narrator introduces the audience to the happy and content locals at the local poultry farm: Cocky Locky, Henny Penny, Turkey Lurkey, Ducky Lucky, Goosey Poosie and the titular Chicken Little -all well protected. But little do they know, outside the yard Foxy Loxy has happened along and is intent on catching himself a chicken dinner. However, he cannot hop in and help himself due to the high fence, locked gates and a well-armed farmer. But Foxy Loxy is nothing if not cunning for there are other ways to swipe a chicken. So taking advice from his psychology book, he states "Why should I just get one, when I could get 'em all." He reads aloud a passage telling him that the best way to manipulate the whole flock is to begin with "the least intelligent". Loxy then breaks off a piece of wood from a fortune teller's sign, and then disorients Little with the suggestion of a thunderstorm before dropping it on his head pretending to be "the voice of doom". Loxy tells Little that the sky is falling, and a piece of it hit him on the head and then goes on to tell him that he should run for his life. Little panics spreading the word to everyone thus bringing a crowd to where he believes the sky piece hit him, but the leader of the flock Cocky Locky inquires about the ordeal he immediately proves the story to be false and afterwards, the crowd disperses leaving Chicken Little humiliated. Miffed that his plan did not work, Loxy refers to his book again to find something to deal with Locky finding a passage that tells him to "undermine the faith of the masses in their leaders". He heads over to Henny Penny's, Turkey Lurkey's, Ducky Lucky's and Goosey Poosie's circles of friends to plant rumors about Locky's intelligence and leadership. This starts another rush of panic among the avians as they spread the rumor. With Locky's leadership in question, Loxy uses it to flatter Little convincing him to stand up and challenge Locky's right of leadership as Little announces to a crowd that he is their new leader and states that he will save all their lives. Locky argues against him stating the sky is not falling. The two argue about it until Locky states, "if the sky is falling, why doesn't it hit me on the head?" From his hiding place, Loxy uses a slingshot to shoot a star shaped piece of wood at him in the head, knocking him out. This shocks everyone and are convinced that Little was right about the sky all along. When they ask him what they should do, Foxy Loxy whispers to Little to lead them to "the cave" believing this is the right thing to do. Little leads the panicked masses out of the farm, through the woods and into the cave and once everyone is inside, Loxy goes in after them and seals up the entrance. The narrator reassures the audience that everything will be alright, but the cartoon closes with a stuffed Loxy picking his teeth and arranging the wishbones of the devoured birds in a row resembling a war cemetery. The narrator is shocked and insists that this is not how the story was supposed to end. Foxy Loxy smirks evilly and reminds the narrator not to believe everything he reads.
According to the audio commentary on the short's 2004 Walt Disney TreasuresDVD release, the studio had the title of the book that Foxy Loxy reads changed from Hitler's Mein Kampf to the generic Psychology in attempt to prevent the short from becoming dated after the war.
