Bart and his friends in his treehouse try to eavesdrop on Lisa and her friends having a tea party, and the treehouse gets destroyed in the ensuing fight. After they rip up a railroad and then goof off with their spoils, Marge gets the Amish to build a new treehouse for Bart. However, because the Amish know little about electricity, Bart's treehouse catches fire, and Homer is trapped inside, unconscious. Homer calls for Santa's Little Helper to save him, but Santa's Little Helper refuses and runs away with a roast turkey. Snowball II does, by clawing at Homer's chest until he wakes up.
Snowball II is worshipped as a hero by Springfield. The local dog park is even renamed the "Snowball II Municipal Cat Park". Homer declares in an interview that "I have no dog!" and kicks Santa's Little Helper out of the house.
Tied up in the yard and thirsty, Santa's Little Helper drinks from a can of beer by balancing it on his nose. Springfield Shopper reporter Dave Shutton takes a photo of it that appears on the front page of the newspaper. This gets the attention of Duff Beer, who announce that Duffman will be replaced with Santa's Little Helper, as their new mascot, Suds McDuff.
Suds McDuff boosts sales of Duff Beer, and the family's fortunes explode, causing Homer to embrace Suds for his success. However, this prompts Santa's Little Helper's original sleazy owner and racing trainer (from "Simpsons Roasting on an Open Fire") to visit the Simpsons and prove that he owns the dog by showing the interview footage of Homer disowning Santa's Little Helper. He becomes Suds' new owner and takes the family's fortunes to himself, much to the Simpsons' discomfort, including Homer, who then cries remorsefully for saying such a horrible thing on TV.
Figuring that if they can get Duffman to replace Suds as the Duff mascot, they can get their dog back, the Simpsons seek Duffman, who has become an ordinary man named Barry Duffman who helps the less fortunate (by teaching math at a local halfway house). The Simpsons ask him to help the family get Santa's Little Helper back at a Duff Beer-sponsored beach volleyball event.
At the event, Homer pretends to be drowning, while he is actually floating on a keg of beer. Santa's Little Helper is too cowardly, as Homer predicted, to save him. However, when Duffman goes in to save Homer, a shark attacks and Duffman refuses to go in, revealing himself to be a coward too. The shark attempts to bite Homer, but it gets drunk by biting the beer keg. The crowd at the beach likes the shark, and Duff Beer announces that the shark — named Duff McShark — will be their new mascot. Santa's Little Helper gladly returns to the Simpson family.