In Puerto Vallarta, Mexico, two Americans, Pete Stancheck and D. J. Johns, claim a Volkswagen car that is a gift from Pete’s uncle. After learning that the Volkswagen named “Herbie” has won the Monte Carlo Grand Prix, D. J. discovers he has been pickpocketed by a boy named “Paco”. The friends recover D. J.’s wallet while three American smugglers, Prindle, Shepard, and Quinn, pursue Paco after they are pickpocketed by the boy in front of a hotel. Paco hides under Herbie’s hood with Pete at the wheel, as Prindle and Shepard chase after the car. Later, police return Shepard’s wallet, and he realizes that Paco has stolen some film that displays a map of South American Incan treasures. The smugglers arrive at the dock just as Herbie is loaded onto a ship bound for Rio de Janeiro, Brazil, with Paco still hidden inside. The men decide to meet the ship at its first stop in Panama. On board the ship, Pete and D. J. join Louise Trens and her scholarly niece, Melissa, for dinner, and Pete reveals he will race in the Brazilian Grand Prêmio. In the ship’s cargo, a crewman, Armando Moccia, finds his dinner is missing, hears the sound of chewing, and demands the culprit surrender. Instead, Herbie drives off, and other crew members help trap the runaway car. An angry Captain Blythe has his dinner with passengers interrupted, and sees an erratic, driverless Volkswagen knocking over cargo. A net stops Herbie, while Paco is removed and confined to a holding cell. When Pete refuses to pay for Herbie’s damage, Captain Blythe confiscates the car. The friends realize that they cannot afford to pay for Herbie’s return so Pete and D. J. convince Louise to sponsor their upcoming race. Herbie rescues Paco from his locked cell, and they crash the ship’s costume party. Captain Blythe is knocked off his feet, and he orders the crew to toss Herbie overboard. When the ship docks in Panama, the captain throws Pete and D. J. off the vessel and Paco escapes before Prindle captures him. Herbie floats along the currents and survives the ocean voyage. Later, several Panamanians help Paco drag Herbie to shore. Herbie surprises Paco by springing to life, and taking Paco on a ride. After Paco decorates Herbie like a taxi, Prindle appears and threatens to turn Herbie into scrap unless Paco finds the film he stole. This causes Paco to pick Pete’s pocket to regain possession of the film. Separately, Louise and Captain Blythe mistake Herbie for a taxi and accidentally share a ride. As they pursue Paco, Pete and D. J. join Melissa, who buys a bus to search for Herbie and Paco. Soon after, the chase leads to a bullfighting stadium, where Herbie rams Prindle’s car in the middle of a bullfight and the bull chases Prindle out of the ring. Herbie imitates a bullfighter waving a cape it has borrowed and defeats the bull. After the bullfight, Herbie and Paco escape as Prindle and his associates approach. Meanwhile, the bus carrying Melissa, Pete, and D. J. reunites with Captain Blythe and Louise, but before long it breaks down and needs repairs. Pete drives the bus for a short distance before it breaks down again. Soon Prindle and Shepard track Paco’s whereabouts from a small charter plane, and Paco is captured and taken aboard. Herbie hears Paco’s cries for help and chases the plane but it escapes. Prindle and his partners find pre-Columbian gold in the forest and abandon Paco. Meanwhile, Herbie locates Melissa’s bus full of passengers, finds Paco and rescues the gold from Prindle. With Herbie disguised as a banana truck, Pete. D. J., Louise, Melissa, Paco, and Captain Blythe drive to the office of Dr. De Moraes, an expert on Incan ruins, to donate the gold, but Prindle steals it back. As the smugglers take off in their small engine plane, Herbie and Paco break the plane’s fuselage. The chase continues on the ground, where the police join in and apprehend the smugglers. Back on the ship, Pete admits Paco is the right driver to win the Brazilian Grand Prêmio. In her stateroom, Pete and Melissa drink wine with Herbie parked nearby. D. J. tells Paco, dressed in a racing suit and helmet, to start his engine. Everyone toasts Paco and Herbie’s future victory.