Sympathetic to Darby's plight, King Brian Connors (Jimmy O'Dea) lures Darby into his kingdom, trapping him "forever". Darby, however, has no wish to leave his daughter so suddenly. Darby rouses the kingdom with a lively violin piece of a fox hunt, and the leprechauns in great spirit mount their tiny horses and leave for a hunt in the night, through a large crack in the wall which King Brian creates. Darby then escapes through this after the last of the leprechauns ride out.
Later, King Brian comes to fetch Darby, angry for being made a fool of. Another battle of wits ensues and Darby entraps the leprechaun king by getting him so drunk that he doesn't notice the sunrise which strips him of his powers. So trapped, he is forced to grant Darby three wishes before he can return home. Darby, however, refuses to make his third wish, trapping King Brian until he makes his decision.
After a rocky beginning, Katie and Michael begin to show signs of growing affection for each other. Katie believes Michael is merely seasonal help, as her father could not bring himself to break the news of his retirement (and their imminent move). However, Michael has a rival in Pony Sugrue, a local bully with his eyes on both Michael's job and Katie.
Katie, angered at finding the truth about her father's retirement, injures herself while chasing a stubborn runaway horse. The banshee appears, heralding Katie's death and sending the cóiste-bodhar, a spectral coach driven by a dullahan, to claim her body. Desperate, Darby elects to use his final wish to go in his daughter's place. On his way to the next world, King Brian tricks Darby into making a final fourth wish ("wishing" that his friend could join him in the afterlife), negating them all and sparing Darby's life.
Katie's fever has broken and she and Michael reveal their love for each other. Michael also fights Pony Sugrue, knocking him cold before joining Katie for a final duet of "Pretty Irish Girl" (see below).
The cóiste-bodhar or 'death-coach' acquired its name from a misunderstanding - 'bodhar' being the Irish word for 'deaf' rather than 'death', the misunderstanding presumably arose from differences of accent.
There are actually two versions of the film's soundtrack. Several of the original Irish actors' accents (namely Darby, Sheila, King Brian and the leprechauns) were deemed too difficult for American audiences to understand and were consequently overdubbed with easier-to-understand voices, possibly from different voice actors. To the unsuspecting viewer the overdub is actually very polished and almost seamless, and dubbed voices do not seem out of place with the original actors. The original soundtrack also contains some dialogue in Irish, especially from King Brian and the leprechauns, which was subsequently changed in the overdubbed version to English alternatives. Both versions are used on television showings and also on DVD; interestingly and somewhat ironically, the Region 1 US/Canada DVD disc contains the original undubbed soundtrack and the Region 2 PAL disc uses the dubbed version.
Despite its setting, the bulk of the film was shot at Disney's ranch in Burbank, California. Second unit footage from Ireland, combined with matte paintings by Peter Ellenshaw, helped present a seamless picture of 19th century Ireland.
A popular misconception is that the duet, A Pretty Irish Girl, was actually sung by Sean Connery and Janet Munro. In fact the vocals on the recording were dubbed by Irish singers, Brendan O'Dowda and Ruby Murray. A single of the duet was released in the UK.
Walt Disney devoted an episode of his show Disneyland to promoting the film, recruiting actors Sharpe and O'Dea to film special segments on the set with Disney, as well as Irish-American actor Pat O'Brien. Despite the film's good-natured salute to Irish culture, actor Cyril Cusack and Chief Justice (later president) Cearbhall Ó Dálaigh picketed this film's launch in Dublin due to what they felt was ridiculous stereotyping of the Irish people.