Kelly plays a sailor who is sold a magic lantern. Rubbing the lamp, he discovers a childlike Genie (David Kasday). Put off by the Genie at first, the Sailor soon befriends him and changes his clothes into a miniature sailor suit to match his. The Genie uses his magic to transport them both inside a book of One Thousand and One Nights. This puts him in conflict with a cartoon dragon, and then two palace guards wielding swords, and falling in love with a cartoon harem girl. With the Genie's help, he defeats the two guards by out dancing them. The Harem Girl then joins him and the Genie, after he changes her clothes into a Women's Naval Uniform. The film ends with the three of them dancing into the distance together.