In Angel Island, selfish and egotistical King Sonic the Hedgehog plans to celebrate his 18th birthday by razing a local village to build a lavish summer home named "Hedgetopia", against the objection of village resident Silver. When Sonic lets go of his conniving adviser Robotnik, he plots to take the throne by poisoning him at dinner. However, his dim-witted assistant Shadow instead accidentally laces Sonic's drink with a potion that transforms him into a wolf. Under Robotnik's instruction, Shadow knocks Sonic unconscious and attempts to dispose of him outside of town. After a stroke of conscience prevents Shadow from casting Sonic over a waterfall, he misplaces the bag containing Sonic on Silver's cart. Silver returns home but cannot bring himself to tell his family about Sonic's decision to raze their village. Silver discovers Sonic as he regains consciousness and declines to help Sonic back to the capital unless he builds Hedgetopia elsewhere. While Silver initially allows Sonic to wander into the forest alone, he ultimately follows and rescues him from a pack of jaguars.
Sonic accepts Silver's offer to take him back to the palace but attempts to leave Silver dangling from an old bridge within an hour's walk from the palace. An altercation between them ensues when Sonic also breaks through the bridge, which results in the bridge's total collapse. Sonic and Silver cooperate to save themselves from dropping into a crocodile-infested stream, and Sonic subsequently saves Silver from the crumbling cliff, convincing Silver of Sonic's good side. Meanwhile, Robotnik discovers that Shadow has failed to eliminate Sonic, and they both set out to find him. The two pairs arrive at a diner at the same time, unaware of the other's presence. While Sonic argues with the cook, Silver overhears Robotnik's plan and Shadow narrowly fails to recognize Silver. Sonic, oblivious to Robotnik's treachery, brushes off Silver's attempt to warn him and leaves him, only to overhear Robotnik and Shadow's machinations himself soon after. Realizing that no one in the castle misses him because of his selfish and narcissistic behavior, Sonic prepares to resign himself to life as a normal wolf but encounters Silver waiting amongst a herd and reconciles with him. Shadow, meanwhile, finally recalls Silver and his connection to Sonic, and he and Robotnik await them at Silver's home, posing as distant family members. Silver has his family delay Robotnik, giving him and Sonic a head starts back to the capital.
They find Robotnik's secret lab and numerous transformation potions, but Robotnik has taken the potion that would return Sonic to normal. Shadow's conscience prevents him from killing Sonic and Silver in Robotnik's direction, and Robotnik drops him through a trap door after he attempts to kill her instead. Robotnik drops the Mobian vial amongst a scattered collection of others, and she calls upon the palace guards to seize Sonic and Silver. A chase through the palace ensues in which Sonic consumes different vials attempting to find the right one. As Sonic and Silver are cornered on the ledges of a giant wall structure, they find they are down to two vials. Robotnik knocks away the vials and uses one of them but transforms into a small cat. After a fight for the remaining vial, Sonic recovers and drinks it. Having restored his Mobian self, made amends with those whom he offended, and regained his throne, Sonic accepts a suggestion from Silver to build his summer home on a neighboring, unoccupied hill. Sometime later, Sonic joins Silver and his family at his modest resort. Elsewhere, Shadow has become a scout leader, along with his girlfriend Amy Rose, and trains a new batch of scouts, including the reluctant Robotnik, who remains a cat.
