The story is being told by Barbie to her sister, Kelly, who is feeling uneasy about being at camp overnight for the first time. She remembers the story while looking at constellations, being started on after finding Cygnus.
The story takes place in a small village, where Odette, a young girl passionate about ballet, lives with her father and sister and works in the family bakery. Odette is very talented in ballet, even though she has almost no training, and knows complicated routines and exquisite ballets. Her sister, Marie, is passionate about horse riding just as Odette is about ballet. As the story moves on, the men of the village go after a unicorn named Lila and try to hunt it down. With the help of Odette, the unicorn manages to escape the hunters and runs into an Enchanted Forest with the curious Odette in pursuit. Lila becomes trapped when the hunters' rope around her neck gets tangled to a branch, so Odette tries looking for something sharp enough to free the unicorn. She spots a stone, which is in fact a magical crystal, within the hollow of a nearby tree and takes it out. Little does she know that the crystal was meant for whoever removed it to defeat the evil sorcerer named von Rothbart, who had been terrorizing the inhabitants of the Forest for years.
The Fairy Queen, who was watching the scene, comes to Odette and tells her that she is the chosen one for purging the evil plaguing the forest, which is Rothbart, who is also the Fairy Queen's cousin. She tells Odette how Rothbart cast a spell on the elves of the Forest and turned them into animals, but the spell was partially reversed by the Fairy Queen and they become human by night, and animals by the morning. Odette, not wanting to get mixed up in the situation, refuses. The Fairy Queen, deeply saddened, complies and sends Lila to escort her out of the forest. Suddenly, Rothbart appears in the woods with his daughter, Odile, the Black Swan and turns Odette into a swan. The Fairy Queen isn't powerful enough to get rid of the spell when Odette asks her to, but is able to partially reverse the effects of the spell, just like for the elves, so that Odette retains her human form by night, but during the day, she is forced to stay as a swan. The Fairy Queen also gives Odette a crown with the crystal on it that will protect her from Rothbart's magic.
Odette also meets the other elves of the forest: Carlita, now a skunk, Ivan, a porcupine as well as a few others. Odette's father and sister, start searching for her, after noticing that Odette is missing. A new character, Prince Daniel, the prince living in the castle in Odette's village, is introduced. A spirited man, he prefers exploring rather than marriage, much to the dismay of his mother.
Odette is determined to find a solution to the problem and goes to a magical library with Lila to find a book that can give her a clue about how to break the spell. They ask a troll named Erasmus to help them, who had initially scared them. However, they are unable to locate the book of Forestlore and Odette is disheartened. Rothbart lures Prince Daniel into the forest, determined to get him to hunt Odette. However, just as he's about to shoot her down, Daniel is captivated by the swan's beauty and decides to let it live. The two soon fall in love when he sees her true form. They dance gracefully and spend the night together, but Odette transform into a swan as the sun rises.
Daniel asks Odette to come to a ball his mother had organized in hopes of Daniel finding a wife. Odette rejects at first, but he's able to convince her to come. Soon, Erasmus—the troll in charge of the library—arrives, having found the book. He reveals to them that the solution is true love, which makes everyone realize that Daniel can save them all. However, if Daniel falls for another girl, the magic crystal will lose its power and Odette will die. The Fairy Queen teaches Odette how to waltz at the ball but are interrupted when Erasmus is kidnapped. They manage to save him from Rothbart's castle by evading the ravens, but Rothbart learns of what will be his downfall. So, under a spell, he makes Odile look like Odette in the eyes of Daniel, so that the Prince can fall in love with Odile and Odette will die.
Odette, after learning of what happened, races to the castle in her swan form to warn Daniel about the trick, but is unable to get inside. At the ball, Prince Daniel pledges his love to Odile, thinking her to be Odette, which causes Odette to fall to the ground due to the crystal having lost its power and she is mortally weakened.
Rothbart reveals the truth and he and Odile escape, but not before he takes the crystal. Outside, Daniel cofronts Rothbart, who aims a spell at him. Using Odile as a shield, Daniel avoids the spell, which hits Odile, turning her into a pig. Daniel runs after them and the Fairy Queen attempts to revive Odette, who is barely alive. After an ongoing chase to the Enchated Forest, the Fair Queen asks Rothbart to a duel to protect Odette. However, Rothbart turns out to be more powerful, and casts a spell on the Fairy Queen which turns her into a mouse. Odette wakes up, just in time to see Daniel coming, and confronts Rothbart. To protect her from Rothbart's magic, Daniel jumps in front of Odette, but the spell affects both of them. The two fall onto each other, their hands intertwined.
At that moment, the crystal's power explodes outwards, stopping Rothbart, as they two were truly in love. The two awaken and all of Rothbart's evil is undone. At last, Odette and Prince Daniel confess their love for each other. Everyone from the village and the Enchanted forest celebrate. It is revealed that Odette and Daniel are to be married and are finally happy. Rothbart gets his just deserves as he is now a Cuckoo Clock while Odile is granted the more merciful but humiliating fate of becoming a maid.
At the end, it is shown the story has given Kelly a new resolve and she promises she will participate in the race the following day. She yawns and heads off to bed, with Barbie smiling behind her.Kelly Sheridan as Barbie / Odette - A shy, helpful country girl who loves to dance. She is turned into a swan by Rothbart because she is thought to be the one who can defeat him. Then, she falls in love with Prince Daniel and later learns to be a brave girl by saving the Enchanted Forest. Barbie is the storyteller of Swan Lake.
Mark Hildreth as Prince Daniel - A prince who loves adventures. He is an expert at archery. He loves Odette from the first time he meets her, but once he is fooled by Rothbart. Odile is turned to be like Odette by Rothbart, and Daniel dances with her. He is based on Siegfried from the ballet.
Kelsey Grammer as Rothbart - The evil sorcerer and the evil cousin of the Fairy Queen who wants to rule the Enchanted Forest. He can turn into a bird, and he also turns Odette into a swan. He has a spoiled daughter, named Odile. In the end, Rothbart becomes a cuckoo clock.
Venus Terzo as Lila - A friendly purple unicorn who is also Odette's friend. She likes to go to people's town and is almost captured by town people. She tells Odette that she (Odette) is braver than she thinks.
Kathleen Barr as Fairy Queen / Marie - The ruler of the Enchanted Forest. Marie is Odette's elder sister who likes to ride horses.
Nicole Oliver as Carlita - A elf who is turned into a skunk by Rothbart. She is Ivan's best friend.
Ian James Corlett as Ivan - An elf who is turned into a porcupine. He is Carlita's best friend.
Maggie Wheeler as Odile - An evil witch and Rothbart's spoiled daughter who fools Prince Daniel at the ball by becoming like Odette. In the end, she becomes the castle's maid.
Michael Dobson as Erasmus - A troll who has a library. The Book of Forest Lore which tells how to break Rothbart's spell is in his library.
Chantal Strand as Kelly - Barbie's sister who is afraid of tomorrow's race at her camp as well as Kelly the elf who was turned into a cygnet.
Gina Stockdale as Queen Mother - Daniel's mother who wants to see Daniel married and wants to have grandchildren.
Brian Drummond as Reggie - Daniel's servant
Garry Chalk as the Baker - Odette's father
The majority of the music used in the film is taken from Tchaikovsky's ballet Swan Lake. In addition, the film has a theme song, "Wings", written by Jason Blume and performed by Leslie Mills. "Wings" is used for ending credits and is also appears in the music video "Barbie of Swan Lake".
The film was released on DVD on September 30, 2003.