As the movie begins, Woody is excited to be going to 'Cowboy Camp' with Andy, as this event is a yearly thing when just he and Andy are together. But, during a small play period before they leave, Andy accidentally ends up ripping Woody's arm. Andy can't fix Woody, so rather than take him to camp, he leaves Woody behind.
The next day, Andy's Mom holds a yard sale, and almost all the toys panic that they will be sold. However, the one in real danger is a little squeaktoy penguin named Wheezy, whose squeaker is broken. Woody manages to call Andy's dog Buster to help him, and they end up getting Wheezy back in the house. However, Woody is left outside and is soon found by Al McWhiggen, the owner of Al's Toy Barn.
Andy's Mom quickly plucks Woody from the collector's grasp, claiming that Woody is not for sale. When Andy's Mom turns her back though, Al manages to steal Woody, and quickly rushes off. The toys have seen this from Andy's room, and Buzz quickly rushes outside to rescue his friend. However, the vehicle pulls away, but not before leaving behind a feather. Buzz also notes the license plate, which reads: LZTYBRN.
Back in Andy's room, the toys attempt to examine the events as they unfolded, while Buzz uses Mr Spell to help him decipher the license plate. Finally, he hits on the key: Al's Toy Barn.
Meanwhile, Woody finds himself in an apartment, and once Al leaves, meets up with three other toys: a horse named Bullseye, a cowgirl doll named Jessie, and an in-the-box doll called 'The Prospector'. Each of the toys are excited to see Woody, but he has no idea who they are. They then show him around Al's apartment, where Woody soon learns that he was once the star of a popular children's show called "Woody's Round-Up."
Back at Andy's place, the toys scan the television in Andy's room for a commercial advertising Al's Toy Barn. Etch-a-Sketch then takes down the location, and Buzz jots it down on a post-it note. A rescue party is then assembled, comprised of Buzz, Potato Head, Hamm, Rex, and Slinky Dog. Buzz tells the others that they'll return before Andy comes back from Cowboy Camp.
Meanwhile, Woody has been watching episodes of the old television show in Al's apartment, but is shocked when one episode ends on a cliffhanger. The Prospector then tells Woody that once public attention turned to astronauts, cowboys were out, and 'space toys' were in. Woody's mood soon sours when he learns that the entire collection of Woody's Round-Up merchandise, as well as the four of them, are all set to become part of a collection and sold to the Kinishi Toy Museum in Tokyo, Japan. Woody says that he can't go, and has to get back to Andy. The Prospector explains that the museum will only accept everything if he (Woody) is in it. Otherwise, the entire collection (including Bullseye, Jessie, and the Prospector) will go back into storage...a situation that gets Jessie gets very upset.