Questioning his ability after a grueling soccer match alongside George (Jonathan Lipnicki), Stuart (Michael J. Fox) gets even more downhearted after George's plane gets broken in an accident because of him. However, Stuart's dad (Hugh Laurie) tells him that for every Little, there is a "silver lining", or a solution to every problem. On his way home from school, Stuart encounters a female yellow canary named Margalo (Melanie Griffith) that is pursued by a giant falcon (James Woods). He drives her to safety. In a matter of time, Margalo, the canary, and Stuart have become best friends.
But, Margalo has a secret. The falcon pursuing her was a crime lord, and he soon catches up to her, reminding her that if she doesn't find an object of wealth soon, the sanctuary he promised her will be called off. But Margalo can't seem to concentrate on her assignment, as she begins to harbour tender feelings for Stuart.
The Falcon eventually comes back, this time threatening to kill Stuart if she doesn't retrieve a wealthy object.
Margalo sadly takes Stuart's mom's (Geena Davis) ring. When the family sees it is missing, Stuart thinks it has fallen down the sink. He offers to go get it, nearly succeeding.
When he is in danger, Margalo saves him, and he thanks her, making her feel more guilt. She decides to leave.
When Stuart can't find her, he assumes she has been kidnapped. He leaves on a quest with Snowbell (Nathan Lane) the cat, but not before setting up a plan with George.
Stuart and Snowbell decide to get information on the Falcon's whereabouts, so they enlist the help of the alley cat Monty (Steve Zahn). It is revealed the Falcon's lair lies at the top of the fabled Pishkin Building. The next morning, Stuart and Snowbell hatch a plan to get to the top. Snowbell gathers some balloons for Stuart, and the mouse ties to a small basket, ascending him to the top.
He soon finds out the canary is the Falcon's slave, and took the ring. He tries to save her, but the villain stops him short, and drops him into a garbage truck.
Meanwhile, Snowbell struggles to get to the top, as Stuart's family leave the house to save him. Up at the top, Snowbell hears that Stuart is dead, not knowing he is in the truck, from Margalo. He swears revenge as he frees Margalo revealing that he trully does care about Stuart, but when the Falcon returns, Snowbell loses his confidence and hides in a paint bucket, which the Falcon kicks off the tower and causes to fall from the top. Snowbell survives the fall, as it is delayed, so the impact is not hard and the bucket protects him.
On the barge, Stuart blames himself for everything, and gives up. But suddenly, he finds George's broken plane, and with some materials, fixes it up, and flies to save Margalo, who has just fled the evil tyrant. Stuart begins an aerial adventure through the park, with Margalo at his side. The Falcon eventually loses them while the Little Family finds them and follows them in a taxi. Unfortunately Falcon catches up and rips off the top of the plane's two wings.
Stuart knows he can't run from the Falcon, and lets Margalo off. Stuart turns and flies the damaged plane in a kamakaze run while Falcon goes into an attack dive. Stuart temporarily blinds him using Mrs. Little's ring and jumps using a hankerchief as a parachute. The kamakaze attack works and Falcon is struck and defeated. Although Falcon survives the attack he's seriously wounded and lands in a garbage can that Monty is desperatly scavenging in just after Monty asks if he can get a decent meal. Monty prepares to eat the villan and presumably Falcon is killed by Monty and becomes his dinner. Stuart's parachute is destroyed by the propeller of the destroyed plane but Margalo saves him.
At the park square, Stuart is congratulated by his family and Margalo and Snowbell reunites with them as well. That evening, Margalo leaves with the other birds to migrate south, but not before saying goodbye to her friends, including Snowbell, who is at the point of tears. Stuart says the silver lining is that she'll be back in the spring. Stuart's baby sister says her first word, or words, "Bye bye, birdie."
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