Two gangs: Fat Sam's Stacheto and Dandy Dan are rivals. Bugsy Malone goes to Fat Sam's bar where he meets wannabe movie star Blousey Brown. The bar is raided and Fat Sam states that it means war. Meanwhile, Dandy Dan is using the new Splurge Gun to destroy his enemies. Bugsy falls for Blousey but Fat Sam's girlfriend, Tallulah wants him for herself. Bugsy is asked to do a job by Fat Sam but it all ends up a mess because Fat Sam had hired Louey Begonzey who dies. Bugsy treats Blousey and says he'll get her tickets to Hollywood but someone steals his newly earned money. His rescuer is made a boxer by Bugsy. Blousey is upset about the tickets and begins to think about what happened.
Trivia: Alan Parker's idea of having a film featuring a cast of only children was suggested by his son.
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