In The Ghost and Mr. Chicken, typesetter Luther Heggs works at the Rachel Courier Express in Rachel, Kansas. One night in front of the Simmons Mansion, a supposed haunted house, Luther spots what he believes to be a murder. He takes photos of the scene, and then runs off to report the crime to the police.
However, as he reports it to the Chief of Police, an angry woman walks in, dragging the murder “victim” (with a big bump on his head) along. As Luther’s boss, George Beckett, and Rachel Courier reporter, Ollie Weaver, look on, woman demands the police throw the man in the drunk tank. Humiliated and without a story, Luther goes home alone.
The next morning at the boarding house where Luther resides, he overhears Ollie in the dining room making fun of Luther’s bumblings to the other guests. Besides having the job Luther would love to have, Ollie also dates the lovely Alma Parker, whom he’d also love to have. While Ollie demeans Luther every chance he gets, Alma is always pleasant to him.
We soon learn of a local legend that refers to the Simmons Mansion Murders. You see, 20 years earlier, almost to the day, old man Simmons murdered his wife with some sort of sharp instrument, and then jumped to his death from atop organ loft at the mansion. Some say that they still hear the organ playing at the stroke of midnight to this very day!
With the encouragement of Luther’s friend (who is also the newspaper’s janitor), Mr. Kelsey, Luther adds a small story to the newspaper about the murder’s 20 year anniversary to generate interest. The town buzzes with excitement at the story.
Knowing a good thing when he sees it, George Beckett assigns Luther to spend the night in the haunted mansion on the anniversary of the murder/suicide. Although scared to death, Luther agrees to go only after Ollie taunts him as a chicken.
Luther goes to the mansion, and when it’s nearly midnight, while Luther is zipped up in his sleeping bag, he hears something. Thinking Ollie is messing with him, he looks around the room. Luther finds a hidden staircase behind a bookshelf which leads up to the organ loft.
There, the organ begins to play by itself, and Luther runs out of the house in terror. As he passes a portrait of Simmons’ murdered wife, he finds a pair of pruning shears in the woman’s throat with blood dripping down her neck. He runs straight to the Rachel Courier Express.
Luther maniacally tells his story to Beckett, and Beckett retells the story to Ollie, who types it up. They print the wild tale in the paper the next morning. Luther’s adventure whirls up more excitement in the town than the paper can handle, and they have to print 500 more papers just to keep up.
Mrs. Halcyon Maxwell runs a chapter of women who believe in the occult. She owns 51% of the town’s bank, and when she finds her husband, Milo, is about to sign over the Simmons’ mansion to Nicholas Simmons, the murdered couple’s nephew, she demands Milo not sign the deed over to him. Nicholas plans to demolish the mansion as soon as the ink dries on the deal, but Mrs. Maxwell wants none of that. The mansion needs to be preserved.
Nicholas decides he’s going to discredit Luther to get that mansion. He sues both Luther and the Rachel Courier Express for libel. At the same time this goes on, Luther and Alma develop a mutual liking for each other, but this only makes Ollie jealous. Alma gives him words of encouragement the night before the trial, and kisses him.
In court the next day, Nicholas’ attorney, Whitlow, calls Miss Neva Tremaine to the stand. She’s Luther’s third grade teacher, and she testifies that Luther liked to tell tall tales for attention as a boy. Whitlow then gets Luther on the stand, and suggests he made up the story to become a full-time reporter. However, Luther’s dramatic retelling of the night’s events stirs up the courtroom spectators, so the judge calls order. He then orders all interested parties to show up to the mansion at 11:30 PM to settle the matter.
When they show up and go inside, Luther can not find how to open the hidden staircase. Instead, everyone heads to the organ loft. At the stroke of midnight, nothing happens. The organ never plays. Everyone concludes that Luther did indeed make up the story, and they go home.
Except Alma. She stays behind to find evidence that backs up Luther’s story. She eventually finds the hidden staircase, and goes up it.
Luther, on the other hand, finds himself alone in front of the mansion. With the town considering him a fraud, he begins to walk home as a failure…again, but suddenly, he hears the organ playing from atop the organ loft, and he goes running back inside.
There, he finds Kelsey playing the organ where he confesses that he was the one who “invisibly” played the organ on the night Luther was there using an additional tuning keyboard located under the pipes. He even planted the pruning shears in the painting for effect. Kelsey was the Simmons family’s old gardener, and he was there on the night of the Simmons’ murders. He knows who really killed them, but never came forward because his pruning shears were the murder weapon. He thought he might be implicated instead of the real killer.
Although he showed up to the trial party at 11:30, the security guard wouldn’t let him enter, so he couldn’t recreate Luther’s story to the judge, jury, and interested parties. The two men hear a scream, and they turn to the hidden staircase where they find Nicholas holding Alma captive, and threatening to kill her.
Kelsey accuses Nicholas in the murders of his aunt and uncle to get their fortune, and then leaving the pruning shears at the scene to frame Kelsey for the crime. Nicholas’ desire to demolish the mansion was to keep anyone from knowing there was a hidden staircase leading to the organ loft; thus ruining his alibi.
While Kelsey confronts Nicholas, Luther runs down the regular stairs, and comes up behind Nicholas. He makes his whole body a weapon, and hurls himself at Nicholas. With an awkward thud, he knocks out Nicholas, and saves Alma.
They then tie Nicholas to a chair where the police arrest him. Kelsey explains his story once more. This time it’s to the Chief of Police, and Kelsey gives him the murder weapon.
With the murder/mystery solved, Luther marries Alma for a happily ever after. As the two turn to walk down the aisle, the organ music switches from wedding music to the eerie music from the mansion. They turn to see it playing without a player, and we wonder if the Simmons’ ghost is really real.