Woody, a pull-string cowboy doll, is the leader of a group of toys that belong to a boy named Andy and come to life when humans are not to be seen. With his family moving to a new house and having a birthday party for Andy, the toys stage a reconnaissance mission to discover Andy's new presents. Andy receives a space ranger Buzz Lightyear action figure, whose features replace Woody's position as Andy's best toy. Buzz does not know that he is a toy when Woody tries to convince him and thinks that he is a real space ranger. While the other toys befriend Buzz, Woody hates Buzz and he doesn't want Buzz to become Andy's best toy.
Andy prepares to go to a family outing at Pizza Planet with Buzz. Woody attempts to replace Buzz so that Woody's position is taken, but knocks him out a window instead, making the toys mad. Andy takes Woody to Pizza Planet with him instead. However, Buzz climbs into the car and confronts Woody when they stop at a gas station. The two toys fight and accidentally fall out of the car, which drives off and leaves them behind. Woody sees a pickup truck bound for Pizza Planet and plans to rendezvous with Andy there, convincing Buzz to come with him by saying that the pickup truck can take him to his home planet. Once at Pizza Planet, Buzz makes his way into a claw game machine shaped like a spaceship, thinking that it is the ship that Woody had promised him. Inside, he finds a horde of squeaky aliens who revere the machine's claw arm as their master. When Woody follows Buzz into the game to try to rescue him, the two of them are captured by Andy's next door neighbor, Sid Phillips, who likes to torture and destroy toys for fun.
The two toys try to escape from Sid's house before Andy and his family move, encountering nightmarish hodge-podge toys of Sid's creation as well as Sid's vicious dog, Scud. Buzz sees a commercial for Buzz Lightyear action figures just like himself and realizes that Woody was right about him being a toy. Unable to face the truth, Buzz tries to prove he is still a space ranger by attempting to fly out of the window, but falls and loses one of his arms. Buzz becomes too depressed over the truth to participate in Woody's escape plan which forces Woody to try and get the other toys attention in Andy's room by waving Buzz's disconnected arm, but the other toys still distrust him for what happened to Buzz and leave him behind. Woody realizes that Sid's mutant toys are friendly when they fix Buzz's arm but is forced to hide when Sid arrives, leaving Buzz behind. Sid prepares to destroy Buzz by strapping him to a rocket, but is delayed by a thunderstorm and sleeps for the night. Woody convinces Buzz life is worth living even if he is not a space ranger because of the joy he can bring to Andy, and helps Buzz regain his spirit. Cooperating with Sid's mutant toys, Woody stages a rescue for Buzz and scares Sid away by coming to life in front of him. However, the two miss Andy's car as it drives away to his new house.
Running down the road, they climb onto a moving truck but Scud chases them and Buzz tackles the dog to save Woody. Woody attempts to rescue Buzz with Andy's RC car but the other toys, who think that Woody got rid of RC, toss Woody off onto the road. Spotting Woody driving RC back with Buzz alive, the other toys realize their mistake and try to help them into the truck. When RC's batteries become depleted, Woody ignites the rocket on Buzz's back and manages to throw RC into the moving truck just in time before they go soaring into the air. Buzz then opens his wings to cut himself free before the rocket explodes, and he and Woody glide through the air and land safely into the car. Andy looks in the box and is relieved to have found Woody and Buzz.
On Christmas Eve at their new house, Buzz and Woody stage another reconnaissance mission to prepare for the new toy arrivals, one of which is a Mrs. Potato Head, much to the delight of Mr. Potato Head. Woody jokingly asks Buzz "What could Andy possibly get that is worse than you?", a question which is immediately answered; Andy's new gift, as it turns out, is a puppy, and the two share a worried smile.
Pixar's Oscar-winning short film "Tin Toy" (directed by Lasseter) and its CAPS project were among works that gained Disney's attention and, after meetings in 1990 with Jeffrey Katzenberg, Pixar pitched a television special called "A Tin Toy Christmas". By July 1991, Disney and Pixar signed an agreement to work on a film, based on the "Tin Toy" characters, called "Toy Story". The deal gave Pixar a three-film deal (with "Toy Story" being the first) as well as 10% of the films' profits.
"Toy Story"s script was strongly influenced by the ideas of screenwriter Robert McKee. The script went through many changes before the final version. John Lasseter decided Tinny was "too antiquated", and the character was changed to a military action figure, and then given a space theme. Tinny's name changed to Lunar Larry, then Tempus from Morph, and eventually Buzz Lightyear (after astronaut Buzz Aldrin).
Billy Crystal was going to play as Buzz, but later refused his role, although he would voice Mike Wazowski in Pixar's later movie, "Monsters, Inc". Katzenberg took the role to Tim Allen, who was appearing in Disney's "Home Improvement", and Allen accepted the Role. "Toy Story" was both Hanks and Allen's first animated film role.
Lasster's 1993 draft of the film was a disastrous result, presenting Woody as a "sarcastic jerk" because Katzenberg kept sending notes to Pixar saying that he wanted more edge to the character. Katzenberg talked with Walt Disney Feature Animation president Peter Schneider in the hall during the screening and asked him why it was so bad. Schneider responded that it "wasn't their movie anymore." Schneider wanted to immediately shut down production, fire all recently hired animators and move the key writers (John Lasseter, Andrew Stanton, Pete Docter and Joe Ranft) into the Disney Studio, pending a new script approved by Disney. Pixar refused and said that the entire story will be changed in two weeks. As promised, two weeks later a new script had been written that made Woody a more likable character. It also included a more adult-orientated staff meeting amongst the toys rather than a juvenile group discussion that had existed in earlier drafts. Buzz Lightyear's character was also changed slightly "to make it more clear to the audience that he really doesn't realize he's a toy" as John Lasseter remarked. After the second screening Katzenberg restarted production. The voice actors returned in March 1994 to record their new lines.
"Toy Story" was made on a $30 million budget, using a staff of 110 people; Lasseter told how hard of the computer animation was to do in the film: "We had to make things look more organic. Every leaf and blade of grass had to be created. We had to give the world a sense of history. So the doors are banged up, the floors have scuffs."
According to Lee Unkrich, one of the original editors of "Toy Story", there was a scene that was cut out of the movie. In this scene, Sid, after he leaves Pizza Planet, tortures Buzz and Woody violently. Unkrich decided to cut right into the scene where Sid was interrogating the toys because the creators of the movie thought the audience would be loving Buzz and Woody at that point.