Julian, doubting the letter, asks Erika to impersonate the Princess, saving the engagement while he investigates Anneliese's disappearance. That night, Anneliese and her cat Serafina are abducted by Nick and Nack, who leave a forged letter saying she ran away. The two bond over their shared troubles and become fast friends. Anneliese and Erika meet and learn they are identical, apart from their hair color and the crown-shaped birthmark on Anneliese's shoulder. Anneliese hears Erika, who is performing in the street to earn money for herself, but Madame Carp collects it as part of her debt. Julian takes Anneliese for a day out into the kingdom so that she can be free for once there, she witnesses the poverty caused by the kingdom’s bankruptcy. Upon learning from his henchmen, Nick and Nack, that the Queen has arranged Anneliese's marriage to King Dominick, he decides to make Anneliese 'mysteriously disappear', which will cancel the engagement after which Preminger can pretend he has found the Princess, earning her hand in marriage, and allowing him to accede the throne and become king-himself.

Unbeknownst to the Queen, the reason behind the kingdom's bankruptcy is her adviser Preminger has been stealing gold, emptying the royal mines.

The Pauper Erika is an indentured servant, working off her parents' debt at Madame Carp's Dress Emporium, but dreams of becoming a singer and seeing the world. Several years later, Princess Anneliese is betrothed by her mother, Queen Genevieve, to the wealthy King Dominick to save the nearly bankrupt royal treasury however, she is in love with her young tutor Julian. In an unnamed kingdom, a blonde princess and a brunette pauper are born at the same time.

Princess and the pauper barbie cast