"Rainbow Randolph" Smiley , a happily corrupt children's television host, is disgraced by an FBI sting for ripping off parents who want their kids on the show. He is replaced by the "squeaky clean" Sheldon Mopes and his character, Smoochy the Rhino. Randolph finds himself unemployed, homeless, and outcast from the television industry by his two-faced associate Marion Stokes . In an effort to return to the spotlight, Randolph hatches several schemes to bring down Mopes in hopes of reclaiming his time slot.
Mopes quickly finds himself losing creative control over his show to his hardened producer Nora Wells . With the help of his new agent Burke Bennett , Mopes renegotiates his contract and is named executive producer. He is approached by Irish mob boss Tommy Cotter , who wants Mopes to create a spot on his show for her cousin Spinner , a former boxer whose numerous head injuries have left him with severe brain damage. Sheldon reluctantly adds Spinner to the show, first as a cowbell-wielding game warden, and later on as Smoochy's cousin Moochy.
Rainbow Randolph sets a scheme to destroy Mopes's career and regain his show too all fail. Mopes becomes enraged to learn that Burke signed him up to star in a Smoochy ice show; he feels that the event will exploit children. Burke and Merv Green , the heads of the corrupt charity running the ice show, unsuccessfully warn Mopes from backing out of the event. Soon afterward, a disguised Randolph dupes Mopes into doing a Smoochy act at a neo-Nazi rally that is raided by the police. Smoochy is labeled a racist and fired. However, when Randolph accidentally lets it slip to Nora that he framed Smoochy, he is arrested. Smoochy's reputation and show are restored. After telling him that his show is back on the air, Nora kisses Mopes and has sex with him, starting a relationship.
Smoochy commits to the ice show. He decides that all proceeds will go to the drug rehab clinic he used to work at, which was closed due to lack of funding; the kids will be given free souvenirs and healthful snacks. Burke and Green retaliate by plotting to kill Mopes and hire a new host who will cooperate with their profit skimming. However, Green and his men accidentally kill Spinner in his Moochy costume; they are discovered and killed by Cotter. Meanwhile, Randolph corners Mopes and Nora in their penthouse and threatens to kill them. They talk him down and discover that he's depressed and genuinely misses entertaining children. An empathetic Mopes offers to let Randolph stay in the penthouse until he recovers.
Burke and Stokes hire heroin addict Buggy Ding Dong , another former host, to assassinate Mopes during his ice show. Buggy steals a backstage pass to get inside. However, Randolph, who has been summoned to the ice show, tackles Buggy just as he tries to shoot Mopes from the rafters. Randolph and Buggy struggle for the sniper rifle, until Buggy falls to his death. After Mopes realizes that Burke and Stokes set him up, he chases after Burke into an alley. He pulls a gun and threatens to kill Burke, but Cotter and her men arrive and persuade him to stop. The movie ends with Smoochy and Rainbow Randolph launching a new show together.
