The main character, a child, loses his hair as a result of fright. He seeks to regain his hair by using a magical formula, whose main ingredient is Peanut Butter (hence the name of the title). This formula works so well that his hair doesn't stop growing. An eccentric artist needs brushes made from human hair. He uses those brushes to create magical paintings. When he realizes that the child's hair continually grows, he kidnaps the child in order to have an endless supply of hair for his brushes.