Opis: Doug Funnie (Tom McHugh) and Skeeter Valentine (Fred Newman) discover a monster (Frank Welker) that lives in Lucky Duck Lake. Believing the monster is evil, they are scared of him at first, but later on, they find him to be nice. Despite this, however, the monster is proof that their friend Beebe Bluff's wealthy father, Bill Bluff (Doug Preis), owner of Bluffco Industries, is polluting the lake, which was what created this monster. The monster almost eats the book Moby Dick, but Skeeter stops him and says, "Stop! You almost ate Herman Melville! You don't eat books, that is a NO!" and the monster returns it to them as an apology, so they name him Herman Melville after the author of the book, and the monster takes a liking to the name. Unfortunately, all of this commotion with the monster makes Doug forget that he was supposed to meet Patti (Constance Shulman) at Mr. Swirly's (Bruce Bayley Johnson), the owner of the local ice cream factory. When he remembers this at the last minute, he runs to Swirly's as fast as he can using the quickest shortcuts that he knows. Once he gets there, Patti is nowhere to be seen. He asks Mr. Swirly if he's seen her, and he says the she was here for a while and looked very upset, and then left with a guy who kept talking about his big plans for a dance. When Doug heard this, he knew that this guy was no one else but Guy Graham (Guy Hadley), a snobby upper class man who wants Patti. Meanwhile, Roger (Chris Phillips) and the AV nerds are building a robot (Eddie Korbich) to kidnap Herman, but when they build the robot it acts like a babysitter to Roger, much to the latter's dismay and annoyance.
Doug then rushes to the Funky Town night club, where Guy and Patti are working on the dance. He apologizes to Patti there and she accepts his apology, but Guy cuts in and says that Doug is "just a stupid little kid." Doug, very angry now, says that he has proof that Mr. Bluff is evil and is polluting the lake. Guy then calls Doug a liar. Doug then invites them both to the report that is being held in front of his next-door neighbor Bud Dink's (also played by Newman) house about Herman and the pollution. Doug then leaves, but the picture of the monster falls out of his pocket without him knowing. Guy picks up the picture and realizes that Doug was telling the truth; however, he calls Mr. Bluff, whom he has connections to. At the reporting, Doug sees that a news reporters camera is inflatable. He then realizes that the news company is a fake, that it is supporting Mr. Bluff, and trying to capture the monster. Doug then has to tell everyone that there has been a mistake, Patti gets mad at him, thinks that he is a liar and walks away with Guy.
That night, Mr. Bluff finds the boys with Herman and kidnaps the monster. The next morning, Doug knows that this is his last chance to save Herman. He goes to the school newspaper room, hoping to find Guy who can lead him to Mr. Bluff. Guy isn't in the room, but Doug sees a newspaper article that says that Mr. Bluff and his men blew a monster to smithereens at a school dance. Doug is at first sad and believes that Herman has died, but he then realizes that the school dance isn't until tonight and that this is what is being planned, so Doug and Skeeter call the Sleech twins Al and Moo (also voiced by Korbich) to help.
At the school dance, Doug has to make the biggest choice of his life: going after Patti or saving Herman. When he does the latter, Mr. Bluff catches Doug and Skeeter in front of Lucky Duck Lake after Herman escapes into it and plans to enslave them, but is stopped by Beebe and Mrs. Dink (Doris Belack). Beebe forces her father off of the scene to defend her friends, while Mrs. Dink hints at Mr. Bluff facing the wrath of the federal government if he does not clean up Lucky Duck Lake. Doug then finds Patti in front of the woods and Doug tries to tell her he is in love with her, but is interrupted by Herman. With the return of Herman and a copy of the newspaper, Patti sees that Doug had been telling her the truth all along and dumps Guy. Also, Skeeter gives Herman the Moby Dick book for something to eat in the lake and Herman also gives Doug a flower to give to Porkchop (also played by Newman) to which Porkchop comes running out of the woods into Herman's arms (earlier in the film, Porkchop was opposed to Herman, but softened up when the Monster gave the dog a gift). The kids say goodbye to Herman; after Herman jumps back into the lake, Doug tells Patti he likes her and Roger almost becomes friends with Doug, but is interrupted by the robot. Doug starts dancing with Patti and Skeeter dances with Beebe as the music continues in the background, ending the film.