Movie Date: June 26, 1981
Kermit the Frog, Fozzie Bear, and Gonzo the Great play newspaper reporters for the Daily Chronicle. Kermit and Fozzie, specifically, are playing identical twin reporters, which becomes the source of a running gag - supposedly, nobody can tell they are twins unless Fozzie wears his hat. While Gonzo is too busy taking pictures of a chicken, prominent London fashion designer Lady Holiday (Diana Rigg) gets robbed of her jewels. The trio are eventually assigned to investigate the theft of the valuable jewels from Lady Holiday, which they have to beg for after their supervisor Mike Tarkenian dismisses them following the Daily Chronicle 's headline about the twins joining the staff (while the other papers report on the jewel heist).
They travel to London to interview her, but with only $12 for the trip, they are forced to fly in the airplane's baggage hold and are thrown out of the plane as they arrive over Britain as it continues on to Italy. They stay at the dilapidated (but free) Happiness Hotel which is run by Pops and populated by Scooter, Rowlf the Dog, Dr. Teeth and The Electric Mayhem, Sam Eagle, Swedish Chef, Rizzo the Rat, Annie Sue, and Lubbuck Lou and his Jughuggers. When Kermit seeks out Lady Holiday in her office however, he instead finds the alluring Miss Piggy, and mistakes her for the fashion designer. Piggy (who was interviewing for a job) poses as Lady Holliday, even going so far as to sneak into a ritzy townhouse (located at 17 Highbrow Street) to impress Kermit with her dwellings much to the surprise of the actual British residents Neville and Dorcas.
At a night club restaurant, Lady Holiday's necklace is stolen by her jealous brother Nicky and his assistants Carla, Marla, and Darla, three of her put-upon fashion models, the very same thieves who robbed her before. After the robbery, Miss Piggy's charade is revealed and she flees, leaving Kermit behind, though they later reconcile in a park. Despite Nicky's instant attraction to Miss Piggy, they frame her for the theft and plan to steal an even more valuable prize: Lady Holliday's largest and most valuable jewel, the Fabulous Baseball Diamond, now on display at the local Mallory Gallery. However, Gonzo is under a nearby table and overhears the plot. Kermit's crew, along with their friends from the Happiness Hotel, decide to intercept and catch the thieves themselves to exonerate Miss Piggy.
The Muppets arrive at the Mallory Gallery, and get to the Baseball Diamond at the same time as the thieves, use the Baseball Diamond in a game of Keep Away and later baseball, complete with Louis Kazagger commentating. Meanwhile, Piggy escapes from prison and, in a bout of serendipity, finds a motorcycle which she uses to crash into the Gallery's window, knocking Nicky, who is holding Kermit hostage, out in the process. Carla, Marla and Darla confront Piggy, only to be immediately dispatched by a flurry of furious karate chops. As the police arrive, all charges against Piggy are dropped, Nicky and his fashion model-accomplices are arrested, and the Muppets get their deserved credit for foiling the heist.
The Muppets then return to America the same way they departed, being thrown out of the cargo hold and parachuting back to The USA, over the end credits which concludes with Gonzo taking a photo of the audience with his overly powerful flashbulb causing the screen to go black as if he blinded his subjects again.
Oscar the Grouch makes the cameo.