- The living Volkswagen Beetle helps an old lady protect her home from a corrupt developer.
- Alonzo Hawk is a mean-spirited property developer who has bought several blocks of land in the downtown district in order to build a gigantic shopping mall. There is one problem however; an elderly widow named Steinmetz won't sell the one remaining lot that Hawk needs to proceed with his scheme. So he resorts to all manner of chicanery, legal or otherwise, to get it. Fortunately, the widow Steinmetz has an ace up her sleeve in the form of Herbie, the miraculous Volkswagen.—Alfred Jingle
- Ruthless real estate magnate Alonzo Hawk (Keenan Wynn) is pursuing his newest indoor shopping center, the 130-story Hawk Plaza. His only obstacle is an archaic firehouse inhabited by "Grandma" Steinmetz (Helen Hayes), widow of its former owner, Fire Captain Steinmetz, and aunt of mechanic Tennessee Steinmetz who appeared in The Love Bug; her displaced neighbor, flight attendant Nicole Harris (Stefanie Powers); and their sentient machines: Herbie the Love Bug, an Orchestrion that chooses its own songs, and a retired cable car known as "Old No. 22". It is explained that Tennessee has gone to Tibet to visit his ailing philosophy teacher, while Herbie's former owner, Jim Douglas, has gone to Europe.
Hawk has made numerous attempts at evicting Mrs. Steinmetz, intending to imprison her in a retirement home of his own making; but Hawk's lawyers have been unsuccessful in these attempts, and when his lawyer nephew Willoughby Whitfield (Ken Berry) comes to visit him, Hawk sends him to Mrs. Steinmetz in their stead. Hawk hopes that Whitfield will appear to be dumb & innocent enough for Mrs Steinmetz to trust him & to vacate the firehouse.
Having met the firehouse's inhabitants, Willoughby becomes disillusioned and decides to return home to Missouri. Having lost him, Hawk attempts to capture Herbie; but when Hawk insults him, Herbie causes a series of traffic collisions and discards Hawk at his own office door, where Hawk orders his subordinates to capture Herbie again, followed by a Policeman giving Hawk several tickets for traffic offenses. While Herbie takes Mrs. Steinmetz to market, they are chased by Hawk's men; whereupon Herbie makes several daring escapes culminating in travel through the 1909 landmark Sheraton Palace Hotel and along a suspension cable on the Golden Gate Bridge, leaving Mrs. Steinmetz unaware of his activity throughout.
Willoughby having decided to go home in disguise, he is convinced by Nicole to stay after she hears him criticize his uncle (a ruse for her benefit, the call having disconnected). Nicole and Willoughby turn friends & Nicole invites him to dinner. Mrs Steinmetz feels that they make a good couple & encourages Herbie to push their relationship along. Herbie takes Nicole & Willoughby to the beach for a romantic evening.
On their return to the firehouse, they find that every item of furniture has been removed by Hawk; whereupon Mrs. Steinmetz, Willoughby, Nicole, and Herbie track the theft to a warehouse, which they invade to recover the furniture and whence they return, Mrs. Steinmetz riding "No. 22" while Nicole and Willoughby follow in Herbie. Piled into "No. 22" is Steinmetz's furniture, as well as a drunk named Judson (John McIntire), who thinks himself on a public cable car. Hawk pursues; but Herbie distracts him and later rescues Mrs. Steinmetz and Judson from a potential crash.
Hawk thereafter recruits an independent demolition agent named Loostgarten (Chuck McCann); while Mrs Steinmetz decides to confront Hawk herself. Accompanied by Willoughby, she drives Herbie onto the window-cleaning machine of Hawk's skyscraper to reach his office, where Mrs. Steinmetz overhears a telephone conversation with Loostgarten about the deal to demolish the firehouse and activates the window cleaning machine to fill the office with foam and water. This done, Herbie pursues Hawk around the building's perimeter until Mrs Steinmetz orders him to desist.
Disguising his voice to resemble his uncle's, Willoughby directs Loostgarten to demolish Hawk's own house. Loostgarten then telephones Hawk to confirm the demolition, waking Hawk from several nightmares showing himself at the mercy of Herbie; whereupon Hawk gives confirmation, but belatedly realizes that he has condemned his own residence and attacks Loostgarten after his house is demolished around him.
In the morning, Hawk calls a truce with Mrs. Steinmetz, and thinking him sincere Willoughby and Nicole go for dinner, while Mrs. Steinmetz invites Judson to a similar meeting; but Hawk violates the truce by sending earth-movers to crush the firehouse and its inhabitants, prompting Herbie to go in search of Nicole and Willoughby. In the absence of Herbie, the only means of defense is an antique Fire hose, which Judson uses against the earth-movers.
Having obtained Nicole and Willoughby, Herbie animates several other Volkswagen Beetles from various places in the city, with whom to frighten Hawk's men and ruin his scheme. Hawk is pursued from the grounds by Herbie, and later captured by the police; and later, Nicole and Willoughby are married, and ride Herbie through an arch formed by the other Volkswagen Beetles.
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