Lilah is actually Snoopy's original owner who was forced to return him to the Daisy Hill Puppy Farm because her family was moving to another place that didn't allow pets.
Snoopy returns home to Charlie Brown. However, he intends to return to Lilah and live with her, so his return home is just to say goodbye to everyone. After a tearful farewell party thrown by the entire gang, Snoopy leaves and Charlie Brown reflects on the loss of his friend.
Arriving at Lilah's new home, Snoopy finds a "No Dogs Allowed" sign and for once is happy about it. He bids Lilah goodbye and returns home to Charlie Brown and the gang who joyfully welcome him back. However, Snoopy demands the return of his croquet set and record collection that he gave to Linus and Schroder before he left...
Snoopy dictates the ending credits that Woodstock types. Like the previous movie, there are pictures of everyone who made the movie.