King Triton and his wife, Queen Athena, rule over the underwater kingdom of Atlantica, which is filled with music and laughter. They have seven young daughters, the youngest of whom is Ariel. The merfolk are shown relaxing in a lagoon above water, and Triton gives Athena a music box. Suddenly, a pirate ship approaches. Everyone escapes except Athena, who is crushed by the ship when she tries to save the music box. Devastated by Athena's death, Triton throws the music box into the ocean and bans music from the kingdom.
Ten years later, Ariel and her six older sisters live under a strict routine maintained by their governess, Marina Del Rey and her assistant, Benjamin. Marina hates being the girls' governess and longs to be Triton's attaché, a job currently filled by Sebastian the crab. Ariel is frustrated by their current lifestyle, which brings her into conflict with her father. One day, Ariel encounters Flounder, a young tropical fish whom she later follows to an underground music club. She is overjoyed by the presence of music, and is shocked when she sees Sebastian performing there. When her presence is revealed, the entire band stops playing and hides, believing Ariel will tell her father about them. Ariel sings a song explaining her love of music and the remembrance of her mother and she joins the club with an oath.
Ariel returns to the palace, and sisters confront her over her disappearance. She explains where she was, and the following night all seven sisters go to the club to have fun. Marina secretly finds them, and she later reports their activities to Triton. Sebastian, Flounder and the band are sent to jail, while Marina gets the job she wants.
Triton confines his daughters to the palace, which results in Ariel asking him why music isn't allowed. Triton refuses to answer and shouts that he won't have music in his kingdom. Distraught, Ariel confronts Triton and says that Athena wouldn't have wanted music to be forbidden and angrily swims to the girls' bedroom, her saddened sisters soon following, while Marina, who is not the girls' governess anymore, is now Triton's new attaché. That night, she decides to leave Atlantica and frees the jailbirds. Sebastian leads them to a deserted place far from the palace where Ariel finds Athena's music box, as Sebastian hoped. Ariel and Sebastian decide to return to Atlantica to bring the music box to Triton, hoping that it will change his mind, as he has forgotten how to be happy after Athena's death.
On the way back, they are confronted by Marina and her electric eels. Marina wants to stop them so she will retain her position of "power", and a struggle ensues. It ends when Marina barrels towards Sebastian, but Ariel pushes her away, getting hit in the process. Triton arrives in time to witness this, and he is remorseful for his actions. He sings the lyrics of "Athena's Song", and Ariel wakes up. The film ends with Triton restoring music to Atlantica and appointing Sebastian as the new court composer, much to everyone's glee with Ariel and Flounder. Everyone, including Ariel, Sebastian, Flounder, and six older sisters, rejoices except Marina, who has been sent to prison and is constantly blowing her nose.
This film's working title was The Little Mermaid III, and it was originally scheduled for a mid-2007 release. When John Lasseter took over Disney Animation, more resources were spent on completing Cinderella III: A Twist in Time, and attention only returned to this film in July 2006 after the wrap up of Cinderella III.
A teaser trailer and musical preview of the film (an alternate version of "Jump in the Line") were attached to the Platinum Edition DVD of The Little Mermaid, which was released in October 2006. At the time, the working title The Little Mermaid III was still being used.
- Jodi Benson as Ariel
- Sally Field as Marina Del Rey
- Samuel E. Wright as Sebastian the Caribbean Crab
- Jim Cummings as King Triton and Shelbow the Sea Turtle
- Parker Goris as Flounder the Tropical fish
- Kari Wahlgren as Attina
- Jennifer Hale as Alana
- Grey DeLisle as Aquata and Arista
- Tara Strong as Adella and Andrina
- Jeff Bennett as Benjamin the light green manatee and the Swordfish Guards
- Andrea Robinson as Queen Athena (singing voice)
- Lorelei Hill Butters as Queen Athena (speaking voice)
- Rob Paulsen as Ink Spot the Octopus and Swifty the Shrimp
- Kevin Michael Richardson as Cheeks the Blowfish and Ray-Ray the Manta ray
The score to the film was composed by James Dooley, recorded the score with a 72-piece ensemble of the Hollywood Studio Symphony, as well as a big band, at the Sony Scoring Stage The film features new songs written by Jeanine Tesori, along with covers of previously-recorded calypso songs that were arranged by Dooley. The songs featured in the film are:
- Athena's Song - Performed by Andrea Robinson (Queen Athena)
- Just One Mistake - Performed by Sally Field (Marina Del Rey)
- I Remember - Performed by Jodi Benson (Ariel)
- Jump in the Line (Shake, Shake, Shake, Senora) - Performed by Samuel E. Wright (Sebastian) and chorus
- Jump In The Line (Shake, Shake, Shake, Senora) Acapella version - Performed by Parker Goris (Flounder), Samuel E. Wright (Sebastian), Jodi Benson (Ariel) and chorus
- Man Smart, Woman Smarter (instrumental only)
- Just One Mistake (reprise) - Performed by Sally Field (Marina Del Rey)
- I Will Sing - Performed by Jeannette Bayardelle
It is currently unknown if a soundtrack album will be released.
The film was released on Region 1 DVD in the USA on August 26, 2008, and on Region 2 DVD in the UK and Europe on September 22, 2008. The DVD contains special features including deleted scenes, a production featurette hosted by the director, games and activities, and a featurette hosted by Sierra Boggess about the Broadway musical.
On December 16, 2008, the film was released in a "The Little Mermaid Trilogy" boxed set that includes The Little Mermaid (Platinum Edition) and The Little Mermaid II: Return to the Sea.
The DVD became the top-selling DVD for the week ending August 31. Reviews of the film have generally been positive, though the new villain, Marina Del Rey, has been criticised as being a poor follow-up to Ursula. The animation quality of the film has been praised as being "impressive" for a direct-to-video and comparable to that of the original film. A mildly negative review has described that in the film "goofiness often gets buried too often underneath a blah story that's much too run-of-the-mill to allow the emotional oomph of the characters' plights to truly impact" The music has also been criticised as being unmemorable, with one review stating that "to label this a musical would be false advertising".
There were some continuity problems between the TV series, this movie, as well as the first film.
- One notable issue is how Flounder and Ariel met. The TV series shows that they met when Ariel was still a child, while this film shows Ariel to have been older.
- According to the film, Ariel never visited the surface since the day Athena died, while the original movie implied that she had been up to the surface at least once prior to the events of the film, as Triton reprimands her for visiting the surface again. It is possible that her visits had started after the events of this film. 
- Ariel never seemed to have an interest in human objects at all in the prequel movie. The TV series as well as the film, show that she has an impressive collection that took some time to build up.
- Another major plothole, was in the ending. The original film implied during "Daughters of Triton" that the concert that Ariel missed was supposed to be her debut appearance in the band, and that her sisters had been veterans in the band.  This is something that would not have been possible seeing how Ariel had saved Music in Atlantica, which would have made her band leader instead of waiting a year to join.
Before details of the plot were revealed, some fans thought that the premise was going to be about Ariel telling Melody about her origins, which was backed up by Tara Strong being credited as a Voice Actress involved in the film, as well as a leaked storyboard where Ariel is conversing with Sebastian and Eric comes in and asks if someone's acting a bit crabby.