Mr. Dinkle and Jack look for work at the Cosman Employment Agency. Jack makes advances to Cosman employee Polly, but he is thwarted by the arrival of her boyfriend, a towering police officer. Polly assigns Dinkle and Jack to babysit for Eloise Larkin's brother and infant sister, while Eloise and her fiancé are out for the evening. The babysitting duties are complicated by the fact that Donald is something of a prodigy, as well as a self-proclaimed "problem child". The dull-witted Jack is soon outclassed by the child, and an attempt to lull the boy to sleep by reading the fairy tale Jack and the Beanstalk (Jack's "favorite novel") aloud fails when Jack stumbles over the larger words. Bemused by Jack's incompetence, Donald reads the story instead—a role-reversal made complete when Jack falls asleep as Donald reads. In his slumber, Jack dreams that he is the young Jack of the fairy tale.
In his dream Jack learns that the Giant, who lives in a castle in the sky, has stolen all of the land's wealth and food. The situation obliges the kingdom's princess to marry The Prince (James Alexander) of a neighboring kingdom, whom she has never met.
Jack must also make sacrifices, when his mother sends him to sell the last family possession, their beloved cow "Henry", to the local butcher, Mr. Dinklepuss. Along the way Jack meets The Prince, disguised as a troubadour (who is kidnapped by the Giant soon afterward). The unscrupulous Dinklepuss pays Jack five "magic" beans for the cow. Upon returning home, Jack learns that the Giant has also kidnapped The Princess (Shaye Cogan) and Henry.
Undeterred by his mother's disappointment over bringing home only beans, Jack plants them and a gigantic beanstalk grows overnight. He decides to climb the beanstalk to rescue everyone from the Giant's clutches, as well as to retrieve "Nellie", the golden-egg laying hen that the Giant previously stole from Jack's family. Upon learning of Nellie's existence, Dinklepuss decides to join Jack on the adventure.
When they reach the top of the beanstalk Jack and Dinklepuss are captured by the Giant and imprisoned with the prince and princess. The princess falls for the troubador after he serenades her, only to later learn this is the same prince she was betrothed. After the Giant releases Dinklepuss and Jack from the dungeon in order to toil around his castle, they befriend his housekeeper, Polly, who helps them escape over the castle wall along with the royal prisoners, Nellie and some of the Giant's stolen gems (pilfered by the greedy Dinklepuss). They flee down the beanstalk with the Giant in pursuit, as Polly escapes the castle behind him, astride Henry. During the descent, Dinklepuss loses Nellie (who falls into the arms of Jack's mother) and then the gems, which rain down upon the impoverished townsfolk below. Once all are on the ground, Jack chops down the beanstalk, sending the Giant falling to his death. The villagers rejoice over their liberation by dancing around the hole the Giant made from his fall while amusingly singing "He Never Looked Better in his Life".
Just before being rewarded by the King for heroism, Jack is rudely awakened from his dream by Donald, who breaks a vase over Jack's head as Eloise and Arthur return home. Jack's angry outburst over Donald's behavior results in a second blow to the head from Dinkle, which returns Jack to his dream state. After greeting the others as their storybook counterparts, Jack walks off into the night with the bravado of "Jack the Giant-Killer".
- Bud Abbott as Mr. Dinkle/Mr. Dinklepuss
- Lou Costello as Jack/Jack Strong
- Dorothy Ford as Polly/The housekeeper/Receptionist
- Buddy Baer as The Giant/Sgt. Riley
- Shaye Cogan as Eloise Larkin/The Princess/Darlene
- David Stollery as Donald Larkin
- James Alexander as Arthur/The Prince
- Barbara Brown as Mrs. Strong
- William Farnum as The King
- Mel Blanc as Farm Animals
- Arthur Shields as Patrick the Harp
- Johnny Conrad and the Johnny Conrad Dancers
Jack and the Beanstalk was filmed from 9 July through 2 August 1951. Like The Wizard of Oz, the film's opening and closing segments were processed in sepia tone, although many of the DVD releases feature these sequences in black and white, while the entire "Jack and the Beanstalk" story was shot in Eastman Color and processed in the SuperCineColor process. Many television stations that aired the film normally transmitted black-and-white shows and movies with color equipment turned off, so they ran the sepia tone openings and closings in black and white while running the color portion in color. In addition, animation is used when showing the beanstalk growing in Jack's backyard.
Since Universal would not spend the money to make an Abbott and Costello film in color, the duo decided to do it themselves. Using the agreement with Universal that they could make one independent film per year, they made this film using Costello's company, Exclusive Productions, and the second color film, Abbott and Costello Meet Captain Kidd using Abbott's company, Woodley Productions.