The film starts with Charlie Brown, Linus, and Lucy laying on a hill, staring at the clouds in the sky. Lucy asks both Charlie Brown and Linus what they see. Linus' views are incredibly detailed, making Charlie Brown feel inferior that he is only able to see a 'ducky' and a 'horsie' in the clouds.
Sometime afterward, Charlie Brown attempts to construct a kite and fly it. His first attempt gets destroyed by a heavy wind before he even gets off the porch. His second attempt manages to get aloft, but not before dragging him everywhere, before the kite crashes to the ground. Angered at his kite, he thrusts it at Lucy, saying 'anyone who can fly this kite is a genius.' Lucy tosses it to Snoopy...who manages to get the kite flying with no problem, much to Charlie's irritation.
Eventually, the baseball season starts, and Charlie is eager for the first game of the season. After first having to contend with his pitcher's mound being covered with dandelions, the groups ends up losing the first game of the season. Charlie dejectedly goes home. In the bathtub, he remarks over his inability to do anything right. As if to add insult to injury, a toy boat he attempts to sail in the tub, sinks to the bottom.
The next day, Linus visits Charlie Brown, and they play tic-tac-toe in the sand on Charlie Brown's front porch. While Charlie laments about his losing streak, Linus tries to put a positive spin on it. "We learn more from losing, than we do from winning," he replies. "I guess that makes me the smartest person in the whole world," says Charlie, being sarcastic. This causes Linus to admit that if Charlie Brown stays positive, he'll win one of these days. However, just as he says this, Linus ends up winning the tic-tac-toe game.
Still unsure what to do, Charlie goes to Lucy's psychiatry booth, seeking 'professional help.' Lucy ends up showing Charlie's many faults in a slideshow. The experience makes him nauseous, and he begs for the 'therapy' to stop. Lucy then attempts to have Charlie Brown kick a football, but once again, she pulls it away, and then plans to use a video camera's instant replay of the event, to analyze him even further. This just makes Charlie even more dejected, with Lucy adding with a smile, 'wait until you get my bill.'
Going to school the next day with Linus, the two are informed of a spelling bee at the school. When Linus suggests to Charlie that he should enter, Lucy, Patty, and Violet begin making fun of him, saying he'll make a fool of himself.
Eventually, Charlie enters, and becomes the winner in his class. With the all-school spelling bee the next day, he and Linus go home and study the dictionary. However, the next day, Charlie's head is a jumble of words.
Even so, he manages to win for the school, and the kids cheer him on, as he heads home. As Charlie attempts to relax, the others tell him that his winning for the school, means he qualifies for the 'National Eliminations Spelling Bee.' Charlie then goes back to studying, but confides in Linus that he feels he'll make a fool of himself.
Some time later, Charlie is sent off by bus to the Spelling Bee. Linus is so overcome with emotion, that he gives Charlie Brown his blanket for luck, before the bus departs for New York City.
This plan backfires on Linus, who begins to experience withdrawal symptoms without his blanket. Talking to Snoopy, he convinces him to come with him to find Charlie Brown and get his blanket back.
After showing up at Charlie's hotel room, Charlie explains that he is not sure where Linus' blanket is, but assumes he may have left it at the library.
Both Linus and Snoopy wander out into the city to look for the blanket. Snoopy is eventually distracted by the ice rink at Rockefeller Center, and skates around the ice, even pretending to be embroiled in a hockey game.
Linus makes it to the public library, but peering inside, sees nothing. After he finds Snoopy, he angrily returns to Charlie Brown's hotel room, only to find Charlie struggling to stay awake after studying hard for the Spelling Bee a few hours away.
As Linus struggles to keep himself going, he sees Charlie shining his shoes...with his blanket! Linus quickly snatches up the blanket, and appears to be just fine.
The three then head to the competition, with Linus and Snoopy watching in the front row, and the other kids watching on television at home.
As the competition continues on, it comes down to Charlie Brown and one other kid. The two are locked in a heated competition, until Charlie Brown is given the word 'beagle.' Unfortunately, Charlie trips up, and spells it b-e-a-g-e-l.
Charlie sadly leaves the competition with his head hung low, and is silent for the rest of the day, even during the group's trip back home.
The day after they get back, Linus stops by to see Charlie, who is laying in bed with the shades pulled down. Linus claims the kids at school missed him, but Charlie says he isn't going back to school. Linus even mentions that they had a ballgame after school, but this still doesn't relieve Charlie Brown from his morose mood, which gets a little more morose when he hears the team won.
As Linus leaves, he notes that his friend seems down because he feels he let the others down, and made a fool of himself.
"But did you notice something, Charlie Brown?" asks Linus.
"What's that?" says Charlie Brown.
"The world didn't come to an end," replies Linus, who closes the door.
These words seem to work on Charlie, who gets up, gets dressed, and walks outside. The world does seem to be going on just as normal. In a clearing, Charlie notices Lucy, sitting around with a football. As she seems to put it in a placekick position, he attempts to sneak up behind her and kick it, but she pulls it away from him at the last second, sending him sprawling on the ground.
As he lays there, she comes up to him and welcomes him home.