The film opens when the Huns, led by the ruthless Shan Yu, invade China. The Chinese emperor commands a general mobilization in which each family is given a conscription notice. The story then switches to the Fa Family where the only child Fa Mulan is preparing to meet the matchmaker on the day. She gets ready and meets the matchmaker only to make a spectacle of herself and fail miserably. Later, at home her father Fa Zhou comforts her just as Imperial forces arrive to give out conscription notices. Fa Zhou, having no son to fight, is forced to enlist despite his age and disability. Mulan poses as a man and flees to join the army in his place. Mushu, a small dragon, travels with her, in an attempt to regain his dignity among the family ancestors by making her a war hero. He, in turn, is accompanied by a dubiously "lucky" cricket named Cri-kee.
Mulan proceeds into camp and meets fellow soldiers, but under advice from Mushu on how to act like a real man, unwittingly starts a camp-wide brawl. In one of the tents, General Li promotes his son Captain Li Shang to Captain and orders him to train new troops while the General attempts to stop Shan Yu at a nearby mountain pass. Li Shang stops the brawl and questions Mulan, who passes herself off as 'Ping'. Li Shang begins a grueling training schedule and is visibly disappointed at his new troop's abilities, or lack thereof. Eventually he orders Mulan to return home, but she succeeds in impressing him by retrieving an arrow from a tall pole while weighed down with brass amulets. The troops, inspired by this, all improve and become good soldiers, particularly Yao, Ling and Chien-Po, who become Mulan's "buddies".
Mushu forges a letter from the General, ordering Li Shang to meet him at the pass. The troops set out to meet General Li, but find the village at the pass razed and the Imperial Troops slaughtered. After pausing to mourn, they make their way to the Emperor. As they journey, Mushu accidentally fires a cannon, giving their position away to the Huns. Shan Yu and a massive force begin stampeding down a snowbank towards the outnumbered troops. Mulan races to a snowbank and fires the last cannon at the mountain above, causing an avalanche and burying the Huns. Shan Yu, outraged at the loss, critically wounds Mulan before being overcome by snow. Mulan and the troops barely escape the snowbank, Mulan saving Li Shang in the process. She succumbs to her wounds shortly after, and while in care, is discovered to be a woman. When Chi Fu, the Emperor's advisor (who had hidden beneath a rock while the others fought) demands she be killed, Li Shang relents and spares her for saving him, but banishes her from the troops as they head to the city. Mulan and Mushu discuss the true reason why they are there: he to get back in the good graces of the ancestors, she to prove she can do something right for a change. As they prepare to leave, Shan Yu and half a dozen of his best warriors emerge from the snow, and head towards the Imperial City. Mulan quickly decides to follow them and warn Shang.
In the Imperial City, the troops are part of a parade in their honor as the 'Heroes of China', but none except Chi Fu are enjoying themselves, as they are in shock about Mulan. Shang is surprised when Mulan rides up, but dismisses her warning. Mulan pleads with the members of the crowd to believe her, but they shake her off. Mushu reminds her she is a girl again, and they will not listen. Shang presents the Emperor with the sword of Shan Yu, but Shan Yu's falcon snatches it from his hands and carries it to his master on the roof of the palace. Shan Yu and his troops reveals themselves, abducting the Emperor and sequestering themselves in his palace. Mulan leads Shang and her three "buddies" (comically disguised as concubines) in a ploy to rescue the Emperor. After a struggle, Mulan eventually overcomes Shan Yu by luring him into the path of fireworks to his apparent death. The Emperor and others in the Imperial City all respect Mulan. The Emperor presents her with his crest and Shan Yu's sword to prove her deeds to anyone.
Mulan travels home and presents the gifts to her father, but he throws the priceless treasures aside and embraces her, calling her his 'greatest gift and honour'. Shang, having being advised by the Emperor that 'you don't meet a girl like THAT every dynasty', has followed her under the guise of returning her helmet. He gladly accepts her invitation to stay for dinner. In addition for helping Mulan, First Ancestor Fa, who grieves the truth about it, gives Mushu his job as a guardian again. Soon, he, Cri-Kee and the ancestors celebrate.