In an unnamed mountain kingdom, a blonde princess and a brunette pauper are born at the same time and grow up unaware that, except for their hair color and the princess' birth mark, they are identical to each other. The princess, Anneliese, craves freedom from her royal duties, especially when she is informed by her widowed mother, Queen Genevieve, that she must marry the wealthy king of a nearby kingdom because their own royal treasury is nearly bankrupt. The pauper, Erika, craves a different sort of freedom, as she is an indentured servant at the bullish Madam Carp's dress emporium to work off her parents' debt.
Preminger, Queen Genevieve's advisor, is hatching a secret plan to become ruler of the kingdom. His minions Nick and Nack have been stealing the gold from the royal mines for some time, which is what led Queen Genevieve to believe she is nearly bankrupt. Preminger plans to announce his newfound wealth to Queen Genevieve, which he believes will allow him to marry Princess Anneliese. However, Preminger learns that Queen Genevieve has already approached King Dominick of the neighboring kingdom to marry Anneliese, and decides that a change in plan is in order.