The original Sgt. Pepper's Lonely Hearts Club Band performed during WWI in France, as the Allies' "most effective weapon." Their melodies cheered troops engaged in battle and stopped hostilities, leading to their receiving the coveted Golden Eagle Award. Back at their hometown of Heartland, they continued performing through the Roaring '20's, the Depression, and through another Great War, until the demise of the bandleader in 1958. He left his magical instruments to the town of Heartland. These items have the power to make dreams come true, and as long as they remained in the town's possession, humanity would live happily foreverafter. He left his wholesome grandson, Billy Shears, (Peter Frampton) his Golden Eagle and musical legacy. The town's venerable mayor, Mr. Kite (George Burns) tells the tale of the new Sgt. Pepper's Lonely Hearts Club band, consisting of Billy, his best friends, Mark, Dave, and Bob Henderson (The Bee Gees), and managed by his jealous stepbrother, Dougie Shears (Paul Nicholas).The new band debuts in their wholesome small town one sunny summer day, introduced by money-hungry Dougie. Dave, Mark, and Bob start off the performance, joined by Billy after he shares a brief moment with his sweetheart, Strawberry Fields (Sandy Farina). Townsfolk of all ages instantly take to the boys, who receive a telegram from Big Deal Records requesting a demo tape, with the promise of big success. Mr. Kite briefly imagines himself as a superstar, performing a number in the town square, alone except for two little girls who join his jaunty dance.The town's magical weather vane picks up a strange signal, the arrival of Mean Mr. Mustard (Frankie Howerd). His mission: to Take Over Heartland. He is apparently directed by the FVB, who reminds him: We hate love; We hate joy; We love money. The band is recording their demo tape at a farm near town as he arrives. Back in Hollywood, Big Deal's B.D. Hoffler (Donald Pleasence) hears the tape and begins his plan to sign them to his label. The band is summoned to Hollywood immediately, giving Billy and Strawberry scant time for tender goodbyes. They share one night in the farm's hayloft before the band's hasty departure.Arriving in L.A. by Big Deal's private jet, the band is welcomed personally by B.D. and his sexy assistant, Lucy (Dianne Steinberg). They are transported by stretch El Camino to B.D.'s mansion, where the naive bandmates are immediately corrupted by liquor, drugs, and women. Later that evening, the intoxicated boys are duped into signing B.D.'s exploitive contract. The next morning they commence recording sessions, leading to instant superstardom with sold-out concerts, intense media coverage, and enormous record sales. During their rise to success, B.D. requires Lucy and her backup singers, the Diamonds (Stargard) to control the band by exerting their evil and sexual influence.Back in Heartland, Strawberry pines for Billy while Mr. Mustard steals the magical instruments from Mr. Kite's office at City Hall. Mustard begins his mission to deliver the instruments to various villainous characters. Without the protection of the instruments, Heartland instantly degenerates into a den of iniquity.Strawberry leaves home in pursuit of her beloved Billy, leaving her parents heartbroken in her absence. Mr. Mustard's robots alert him and his Brute (Carel Struyken) of Strawberry's departure. When she arrives in L.A., she sees a billboard showing Billy and the rest of the band, next to another featuring Lucy and the Diamonds. Both billboards come to life. The women's seductive performance lures the men into their embrace, horrifying the distraught Strawberry. When she momentarily turns away, the billboards return to their inanimate states.The next day, Strawberry arrives at the band's recording session, witnessing some flirtatious glances between Billy and Lucy. B.D. and Dougie try to get rid of her, but she is able to get in and explain the treachery that has befallen Heartland. Mr. Mustard arrives moments later, and the band accosts his van in an effort to recover the stolen instruments. The van's computer indicates the first instrument went to Dr. Maxwell Hammer (Steve Martin), a cheerfully deranged and money-driven physician. Billy, Mark, Dave, Bob, and Strawberry make haste to Dr. Hammer's office and retrieve Sgt. Pepper's silver cornet after a non-contact fight sequence. They find the drum in the van, then seek Father Sun (Alice Cooper) for the tuba. In his Orwellian lair, he drums the message, "We Hate Love; We Hate Joy; We Love Money" into the heads of militant young cadets. The band and Strawberry retrieve the tuba, but Billy is injured by an electrical shock. Back safely in the van, Strawberry lovingly tends to the unconscious Billy. He dreams of her, then revives at the sound of her beautiful singing.Mark Henderson, working at the van's computer, causes a malfunction and cannot retrieve the location of the final missing instrument. Heartland continues to deteriorate into desperate circumstances. B.D. is forced to cancel several tour dates, but Dougie suggests a huge benefit concert to save the town.One day, as the townsfolk drudge through the town, bewildered at its delapidated state, they are surprised by the arrival of a singing and acrobatic troupe, anchored by Sgt. Pepper's Lonely Heart's Club Band and the lovely Strawberry Fields. Mr. Kite, along with the rest of the town, is cheered at this fortunate turn of events. B.D., Dougie, and Lucy are pleased at their business cunning in exploiting the situation for financial gain. Dougie and Lucy go into City Hall, where the day's proceeds are stored and load up a wheelbarrow with several bags of money. They transfer the money into the van's refrigerator as Earth, Wind and Fire perform the evening show for the town, Billy and the Hendersons enjoy front-row seats. Mr. Mustard and the Brute get to town and find the van. They kidnap Strawberry and drag her into the van, then drive off. Dougie and Lucy manage to hide in the van without being discovered. The band sees the departing van and sets off in hot pursuit via the town's hot air balloon.Mustard was headed for FVB Central with the recovered instruments where the evil genius would suppress the magical instruments and make the world safe for his legions. Unless the band could arrive first and stop them. Mustard, who has admired Strawberry all along, attempts to woo her via serenade in her bound-and-gagged state. Soon, the balloon comes into view, and Dougie and Lucy try to escape the van with some of their lot., They are discovered and led into FVB Central along with Strawberry, then tied up and forced to endure a performance by FVB - Future Villain Band (Aerosmith). Billy and the Hendersons break into the complex and wrestle FVB into submission, killing the evil genius (Steve Tyler). Unfortunately, Strawberry falls to her death in the struggle.Back in Heartland, the cleaned-up town mourns the loss of Strawberry Fields, who lies in state in a coffin of clear glass engraved with Heartland's signature hearts. Billy, Dougie, and the Hendersons are all pallbearers. Mr. Kite questions whether it was worth the loss in order to restore the town. Leaving the church after her service, Billy sadly walks off for some time alone, remembering the good times he shared with Strawberry. He then attempts suicide by jumping from a rooftop. As he falls, the Heartland Weather Vane (Billy Preston) comes to life and returns him to the rooftop. Billy Shears is not only saved, but apparently cured of his depression by this surprising turn of events.The Magical Weather Vane then changes Mr. Mustard and the Brute into a bishop and a monk; Dougie and Lucy into an altar boy and a nun. Next, he brings a hale and hearty Strawberry Fields back to life. She runs to Billy and they embrace warmly in a fairy tale ending.The townsfolk are joined by dozens of celebrity guests of 1970's fame for a rollicking and joyful finale, in a tribute to the cover of the original Beatles album that inspired the film.