When a local baker is murdered, it comes to the attention of the local media that there is a serial killer on the loose, as twelve bakers have been murdered in total. Reported as a "cereal killer" [sic] on the front page of the newspaper. Meanwhile, Wallace and Gromit have opened a bread making business, "Top Bun", and have begun a "Dough to Door" delivery service, where on a morning basis the duo deliver bread to peoples' houses. One morning whilst going on the usual route, they almost run over a fat lady and her dog on a bicycle. Realising that this is the "Bake-O-Lite" lady Piella Bakewell, a former pin-up girl for the bread company, Wallace falls head over heels in love. Suddenly, as she disappears out of the view of the van rear vision mirror, her brakes fail and Wallace and Gromit have no choice but to help her.
The van does a U-turn and chases after Piella. Wallace proceeds to scale the front of the moving van, (which is now moving at the same speed as the bicycle) in the manner of Spider-Man; and straddles the bicycle's front forks. The duo then use fruit buns as brakes between Wallace's knees to slow the bike. However, the bike stops inside the local zoo next to the crocodile pit. Wallace, Gromit, Piella and her dog Fluffles are catapulted into the air, almost landing inside a crocodile's mouth, but are saved by a quick-thinking Gromit who jams the mouth of the croc open with a bread stick and saves Fluffles. Gromit then checks the bike's brakes and seeing that they are working just fine, becomes somewhat suspicious.
Wallace and Piella enter into a whirlwind romance, until Gromit discovers Piella's identity as the serial killer. Wallace, however, is too starry-eyed to pay attention to Gromit's concerns, announcing that he and Piella are engaged to be married. Gromit tries all kinds of tactics to thwart Piella going so far as to install an airport-style metal detector in their home. Piella almost succeeds at pushing Wallace to his death into the mechanisms of the machine - Gromit is chained and unable to help him - but she is hit by a bag of flour (which can only have been launched by Fluffles). She is covered in flour from head to foot, and knocked down the stairs, prompting an angry outburst against bakers and results in her leaving grabbing Fluffles with some malice. Wallace and Gromit return home and Wallace laments the end of his romance with Piella. A short time later, however, Piella appears at the door carrying a large box, which contains a cake. She instructs Wallace to light the candle at four o'clock for a surprise, then makes an excuse and leaves, after telling Gromit that Fluffles is "not well".
Gromit follows Piella home to see what has happened to Fluffles, but is caught and imprisoned with Fluffles in the store room. The two dogs manage to escape in Piella's hot air balloon, and arrive at Wallace's house just as Wallace is lighting the candle on the cake. Gromit attempts to extinguish the wick, only to discover it is a relighting candle. In the resulting struggle between Wallace and Gromit the cake falls to the floor, revealing a bomb underneath. Gromit then attempts to dispose of the bomb, but is thwarted when the places he seeks to dispose of it are occupied by a group of ducks and a pair of nuns carrying kittens, in a scene which references Batman (1966 film).
Gromit tries to throw the bomb out of the house (towards the Yorkshire border) but is hit by a revolving part of a machine, and falls into a vat of dough. The bomb falls out the window, and Piella comes after Wallace with a spanner, exclaiming her pure disdain for baking and her motives behind the serial killings. She is stopped in her tracks by a yellow forklift truck contraption with robot hands covered by oven-mittens, with Fluffles at the wheel. Piella picks up two rolling pins and swings them around her head like nunchucks, then tries to attack the machine (in a parody of the climactic scene of Aliens), all the while Fluffles stopping her blows with the mitts, knocking Wallace straight through the wall by a fierce blow in the process. Wallace and the bomb, which are now caught on the revolving windmill, both fall into the house, and Gromit manages to get himself out of the dough.
As the fight ensues, Piella is pushed closer and closer to the edge of the house until Wallace arrives making a remark about the bomb. This is all the time Piella needs as a distraction and she leaps onto the balloon for safety. It is revealed that the bomb is inside Wallace's trousers, and the two dogs desperately use dough pressure to try to equalise the force of the forthcoming explosion. Due to her weight, the balloon can't support Piella, and she comes crashing down into the crocodile pit in the zoo, only to be eaten. This is the first death of a human villain to occur in a Wallace and Gromit film. The balloon (liberated from the overweight Piella) rises up into the clouds where Piella's ghost is briefly visible as her once-thin self; she says goodbye to Wallace with a wave while holding a plate with a loaf of Bake-O-Lite bread.
After the climax Wallace and Gromit decide to deliver some bread in order to take their minds off the gloomy turn of events and almost run over Fluffles who is waiting in the driveway. They see she is sad at losing her owner so they let her hop in the van to join them on their deliveries and all three drive off into the sunset as the song "Puppy Love" plays on the van's stereo.