It is a parody of surfing documentaries, such as The Endless Summer and Riding Giants, with parts of the plot parodying North Shore. Real-life surfers Kelly Slater and Rob Machado have vignettes as their penguin surfer counterparts. To obtain the desired hand-held documentary feel, the film's animation team captured a physical camera operator's moves.
A documentary crew follows the events of Cody Maverick (Shia LaBeouf), a 17-year-old rockhopper penguin who has wanted to be a professional surfer ever since a visit from surf legend Zeke "Big Z" Topanga several years ago. When a talent scout shorebird named Mikey (Mario Cantone) arrives to find entrants for the "Big Z Memorial" surfing contest, Cody jumps at the chance despite lackluster support from his family. En route to the contest, Cody befriends another entrant, Chicken Joe (Jon Heder).
The entrants arrive at Pen Gu Island, the site of the contest, where Cody meets—and immediately falls in love with—Lani (Zooey Deschanel), an older female penguin who is a lifeguard. He also meets Tank "The Shredder" Evans (Diedrich Bader), an egotistical penguin who has won the Big Z Memorial nine times since it was first held after Z's disappearance during a previous match 10 years ago.
Cody sees Tank disrespecting Big Z's memorial shrine and then Tank attacks Chicken Joe. Cody immediately challenges Tank to a surfing duel, which Tank easily wins while Cody nearly drowns. Lani rescues Cody and takes him to her uncle, the "Geek" (Jeff Bridges), to help Cody recover from his injuries. Cody wakes up and panics when he can't find the souvenir necklace he got as a kid from Big Z. Geek downplays the necklace, but decides to return it when he later finds it in his hut.
Geek finds Cody sitting on an koa log and offers to teach him to make a perfect surfboard. They attempt to take the log back to Geek's house, only to lose control of it and end up on a beach away from the contest. When Cody gets to the beach, they discover a shack full of old trophies and surfboards, which are actually Z's old belongings. He spots Geek watching all those things, and he realizes that Geek is actually Z, the same surfer he had idolized all those years, and asks Z to teach him to surf. Reluctantly, Z agrees, but says that Cody has to make his own board first.
The attempt doesn't go well, however, as an impatient Cody doesn't listen to Z's advice about using long, smooth strokes and makes a board that shatters as soon as he tries to enter the water. Frustrated, he storms off, running into Lani, who eventually persuades him to return. That night, a calmer, more patient Cody works on a new board, finishing it by morning, falling asleep.
Z compliments Cody on his board, but when Cody is eager to start training, Z instead has him do seemingly menial tasks unrelated to surfing. Cody loses his patience with Z only playing with him, but when Z is asleep, he places him on the board and pushes him into the water. Z asks him if he had fun, and when Cody tells "yes", Z takes him to the water. Z teaches Cody, telling him to surf the waves with long, smooth strokes, just like making the board. Lani comes in and joins them. Cody then asks Z if he'll come watch the contest, but Z refuses, saying he faked his disappearance because he realized he couldn't compete with Tank, and that he was tired. Upset that Z just gave up, Cody leaves, meets up with Chicken Joe, and gets back to the contest just as it begins.
Tank easily makes the finals, as do Cody and Joe, and Joe turning out to be a natural born surfer. In the semi-finals, Tank battles with Cody, with Tank playing with him, but he falls off the board and loses. Cody and Joe make it to the finals. During the finals, however, Tank bursts in and tries to cause Joe to wipe out. Cody intervenes at the last minute, sending him and Tank out of bounds on the rocks. Tank wipes out and is rescued by Lani while Z, who had been secretly watching Cody's performance, helps Cody get back to the beach.
Z and Cody find out that Chicken Joe won by default since Tank and Cody were disqualified. Cody no longer cares about winning, however, having decided he'd rather just have fun instead. Z reveals himself to the audience and invites all the spectators to surf. Cody finishes his interview and joins the rest of his friends in the water.
In a post-credits scene, the film crew interviews Cody's mother and older brother Glenn. Cody's mom says she doesn't mind that Cody didn't win, but Glenn still sees Cody as a loser, causing his mom to lecture him. In disgust, Glenn ends the interview, and is later seen carelessly tossing the crew's expensive equipment out the window. He then says, "Go back to Hollywood!"
- Shia LaBeouf as Cody Maverick - A seventeen-year-old Northern Rockhopper Penguin who is determined to win the tenth annual Big Z Memorial Surf Off.
- Jeff Bridges as Ezekiel 'Big Z' Topanga a.k.a. "Geek" - Cody's idol, a professional surfer who is presumed dead.
- Zooey Deschanel as Lani Aliikai - A lifeguard and Big Z's niece. She quickly becomes Cody's love interest.
- Jon Heder as Chicken Joe - A rooster from Sheboygan, Wisconsin who also participates in the Big Z Memorial Surf Off and befriends Cody.
- Mario Lopez as Mikey Abromowitz - A talent scout shorebird who is sent out to find wannabe surfers.
- James Woods as Reggie Belafonte - a sea otter who acts as Tank's manager. His character is loosely based on boxing promoter Don King.
- Diedrich Bader as Tank "The Shredder" Evans - The main antagonist. A surfer who has won the Big Z Memorial Surf Off nine times.
- Dana Belben as Edna Maverick - Cody's mother.
- Brian Posehn as Glen Maverick - Cody's older brother.
- Kelly Slater as Himself, professional surfer.
- Rob Machado as Himself, professional surfer
- Ash Brannon and Chris Buck as the documentary makers.
- Sal Masekela as SPEN Announcer
- Reed Buck as Arnold, a young penguin who wants to become a surfer; he often pretends to drown to gain Lani's attention.
- Adventure Ride