A boy called Andy Davis (voice: John Morris) uses his toys to act out a bank robbery. The bank is a cardboard box, the robber is Mr. Potato Head (voice: Don Rickles) assisted by Slinky Dog (voice: Jim Varney), and the bystanders include Bo Peep (voice: Annie Potts) and her sheep. The day is saved by cowboy doll Woody (voice: Tom Hanks) playing the sheriff, with help from Rex the dinosaur (voice: Wallace Shawn). Woody is the only toy who gets to say his own lines because he has a pull-string that makes him say things like "Reach for the sky!" and "You're my favorite deputy!"
During the opening credits (soundtrack: Randy Newman's "You've Got a Friend in Me"), Andy takes Woody downstairs to find his mother (voice: Laurie Metcalf) decorating the dining room for his birthday party. He asks if they can leave the decorations up until they move, and his mom agrees. She says the guests will arrive soon and sends him back upstairs to get his baby sister Molly (voice: Hannah Unkrich), whose crib is in his room. Andy tosses Woody onto his bed before he pulls Molly out of her crib and carries her away.
Woody and the other toys have seemed limp and inanimate up to this point, but as soon as Andy leaves the room, Woody sits up and expresses surprise that the birthday party is today. He calls "Ok, everybody, the coast is clear," and the other toys come to life too. Woody calls a staff meeting and tells Slinky Dog to spread the word. Within a few minutes (during which Bo Peep makes a date with Woody for that evening), all the toys are assembled. Woody starts by reminding them all to find a moving buddy so they don't get lost when the Davis family moves to their new house, which will happen in a week. Then he tries to downplay the news that Andy's birthday party is happening today, but it causes a commotion as the toys know that Andy's actual birthday isn't till next week. Rex worries that someone will give Andy another dinosaur, and many of the toys have similar concerns. Woody points out that it makes sense to have the party before the move, then tries to calm them down. He's interrupted when Hamm (voice: John Ratzenberger) the piggybank, stationed near the window, announces that the guests are arriving. The toys rush to the window to see the presents the kids are bringing; the bigger boxes make them especially nervous. Hamm predicts "we're next month's garage sale fodder for sure." Woody finally says, "If I send out the troops, will you all calm down?"
Sending out the troops means that the little green plastic soldiers, led by Sarge (voice: R. Lee Ermey), lower the baby monitor to the first floor and hide with it in a potted plant, where they can observe the opening of the gifts and report back to the toys in Andy's room. At first, the presents seem nonthreatening — a lunchbox, bed sheets ("who invited that kid?" wonders Mr. Potato Head), a Battleship game. But Andy's mom pulls a surprise present from the closet. Andy's very excited about it, but before they hear what it is, Rex knocks the speaker off the table and the batteries fall out. Sarge warns that the kids are headed upstairs, but the toys barely have time to resume their previous positions before the stampede thunders in. One of the kids (Andy?) sweeps Woody off the bed, saying "make a space, this is where the spaceship lands!" They put something down where Woody was, then Andy's mom calls them back down to play games and suddenly the room is empty again. The toys creep out of their hiding places to see the new toy, pausing in surprise when Woody crawls out from under the bed. The new toy has taken Woody's place on the bed, which causes consternation. Woody reminds them that no one is being replaced, and they look up to see what's on the bed.
It's Buzz Lightyear (voice: Tim Allen), space ranger, Universe Protection unit. Buzz believes he's crash landed on a strange planet on the way to sector 12, and his ship (his box) is damaged. Woody welcomes Buzz to Andy's room and tries to explain that Buzz has landed in Woody's usual spot. The other toys climb up on the bed to meet Buzz and ask him about the buttons and gadgets on his space suit. They're impressed with Buzz's voice recordings — "a quality sound system" — not like Woody's pull-string-activated voice, which "sounds like a car ran over it." Buzz also has a laser ("a little light bulb that blinks," grumbles Woody), and wings. Buzz takes exception to being called a toy, and when Woody says he can't really fly, Buzz climbs the bedpost, shouts "to infinity and beyond!", and dives. He bounces off a rubber ball, does a loop-de-loop on the racetrack, and gets stuck for a few rotations on the toy plane tethered to the ceiling before flipping down and landing neatly back on the bed. All the toys are dazzled except Woody, who says "that wasn't flying, that was falling with style!"
In the montage that follows (soundtrack: Randy Newman's "Strange Things Are Happening to Me"), Andy has Buzz shoot Woody, then