The film begins with Howard the Duck (voiced by Chip Zien), who lives in a parallel universe inhabited by anthropomorphic ducks. Howard spends his days smoking, drinking and reading the latest issue of Playduck. One day, as Howard relaxes in his armchair, it begins to quake violently and propels him out of his apartment building and into outer space. He eventually crosses dimensions and ends up in Cleveland, Ohio. Howard encounters a woman being attacked by thugs and decides to help her out with his unique brand of "Quack Fu". After the thugs scamper, the woman introduces herself as Beverly (Lea Thompson) and decides to take Howard into her apartment and let him spend the night. The next day, Beverly takes Howard to a supposed scientist named Phil Blumbertt (Tim Robbins), whom Beverly hopes can help Howard return to his world. As Phil is revealed to be only a janitor, Howard resigns himself to life on Earth and rejects Beverly's aid. Howard later lands a job cleaning up at a local romantic spa. Due to unfair treatment by his boss, Howard quits the job and returns to Beverly, who plays in a band called "Cherry Bomb". At the club Cherry Bomb is performing at, Howard comes across Cherry Bomb's manager and confronts him when he bad-mouths the band. A fight ensues, in which Howard is victorious.
Howard rejoins Beverly backstage and accompanies her back to the apartment, where Beverly elects Howard to be Cherry Bomb's new manager. The two begin to flirt and almost engage in sexual intercourse, but are interrupted when Blumburtt and two of his colleagues, Doctor Walter Jenning (Jeffrey Jones) and Larry (David Paymer), arrive and reveal how Howard came to this world: earlier, the scientists have been working on a dimensional-jumping device that just happened to be aimed at Howard's universe and brought him to Earth when it was activated. They theorize that Howard can be sent back to his world through this same process, so they drive Howard to the lab planning to send him back. However, the device malfunctions upon being used a second time, arousing the possibility of something else being brought to Earth this time around. Around this time, Jenning's body is taken over by a lifeform from another alternate dimension. At a diner, the lifeform introduces itself as the "Dark Overlord" and demonstrates its developing mental powers by assassinating table condiments. Howard then gets into a fight when the truckers in the diner begin to insult him. The fight results in Howard's capture and near-decapitation at the hands of the diner chef. However, the truckers are scared off when the Dark Overlord destroys the cafe and kidnaps Beverly, escaping in an articulated truck.
Meanwhile, Howard finds Phil and frees him from a police car. On the run, they discover a light aircraft, which they use to hunt down the Dark Overlord and Beverly. Having returned to the lab, the Dark Overlord ties Beverly down to a metal bed, hoping to transfer another Dark Overlord into her body with the dimension machine. Howard and Phil return to the lab and supposedly destroy the Dark Overlord with an experimental "neutron disintegrator" laser. However, the Dark Overlord reveals itself as a monstrous stop-motion creature, Howard fires the neutron disintegrator at the beast oblitirating it. All the while, the dimension machine is in the process of bringing more Dark Overlords to Earth, leaving Howard with no choice but to destroy the machine. This results in Howard's loss of a ride home, a decision he comes to accept as Earth is now safe. Howard becomes Beverly's manager and hires Phil as an employee on her tour.