Needing to get away from hunters, Bugs digs a tunnel and accidentally winds up in Sing Song Prison (a clear reference to Sing Sing Prison; "No Hanging Around"). As he tries walking away, prison guard (later a prisoner) Yosemite Sam (here called Sam Schultz, presumably as a character role, possibly a reference to Dutch Schultz) beats Bugs with a billy club, telling him, "Trying to pull an escape, 777174, huh?" To which Bugs replies, "I'm not 777174 - I'm only 3½." Sam finds this fine, and soon Bugs is in a prison uniform, breaking rocks, with the prison number "3½" (as Bugs says, "Eh, my mother told me there'd be days like this.")
When Sam tells Bugs he'll be in prison for 50 years, Bugs tries to make an escape, telling Sam that a different prisoner is escaping over the wall. Bugs puts his own ball which he's chained to in the cannon, which Sam fires, causing Bugs to leave. Sam chases after Bugs and brings him back.
When Sam attempts to put Bugs into a jail cell, Bugs manages to pull a switch on Sam, causing Sam to be locked up instead. When this ploy fails, Sam vows to place Bugs insolitary confinement for 99 years, to which Bugs replies "You wouldn't be so tough if you weren't wearing that uniform!" Sam takes the bait and doffs his jacket and cap, while Bugs, in striped prison tunic and hat, does the same. After a few fight gestures from Sam, Bugs concedes and dons Sam's guard uniform, leaving Sam to unthinkingly don the prison garb, at which point Bugs summons the guards and gets Sam beaten up and locked up instead. Although now free to leave through his tunnel, Bugs is having too much fun to quit outsmarting Sam so soon, and, posing as a sympathetic guard ("I'm gettin' ya' outta here, see? I haven't forgotten what ya' done for Mary an' the kids, see?"), hands Sam an 'AJAX Escape Kit' (disguised as a "loaf of bread"), complete with map and pickaxe. Sam winds up digging into what appears to be a jungle, but turns out to be oversized plants in the office of the warden ("SCHULTZ! Just what is the meaning of this?!"), who yells at Sam before he's kicked out.
After a few more failed attempts at getting Bugs (including mistaking Bugs for the warden, and soon after, the actual warden for Bugs), Sam has finally done enough. He opens the door, yelling for Bugs to get out. With Bugs gone, Sam is delighted... until he hears the warden over the intercom, "SCHULTZ! OFFICE!" The next scene is part of an angry-mooded Sam in a prison uniform, breaking rocks, wondering who was the 'stool pigeon' who squealed on him. We then see Bugs standing on a stool atop the prison wall, acting like a pigeon and cooing, implying that he told the warden about letting him out.