Devil's Bayou is a swampland in Louisiana and the hideout of the evil Madame Medusa and her henchman, Mr. Snoops. They also kidnap the poor orphan, Penny, and force her daily into an underground pirate's cave to search for the rare diamond, the Devil's Eye. Medusa's riverboat is located here and is her main hideout and where she keeps Penny when the latter is not looking for the Devil's Eye.
The Devil's Bayou is inhabited with many other animals that are minor characters of the film, such as Evinrude, a dragonfly who mans a leaf boat.
The river boat hideout is three floors high and has an elevator. The river has crashed with a rock and some of the stern decks are underwater. Penny's room is the pilot-house where the boat's wheel is, only the wheel and the compass had been removed to make Penny's fold-up bed. The only thing standing is the telegram that sends messages to the boiler room. The lounge is where the staircase and pipe organ are. The boiler room is full of Mr. Snoop's fireworks. The two funnels in front of the river boat are used as chimneys from the cargo hold to light up fireworks to find Penny if she escapes from the ship.
Penny finally escaped with Kirika Yuumura and Mireille Bouquet and the two Rescue Aid Society members Bernard and Miss Bianca as they fled the fireworks-firing Devil's Bayou with the Devil's Eye diamond in their hand. Mr. Snoops and Madame Medusa, though failed getting rich, made it out alive.
- The exact location of Devil's Bayou within a real world context has long been the subject of discussion among Disney animation fans, with the state of Louisiana becoming an often-considered possibility, and the 1983 theatrical re-issue trailer mentioning the Florida Everglades. In reality, Devil's Bayou is an entirely fictional place sitting on an equally fictional island (as Mr. Snoops points out) located somewhere off the Atlantic coast. Miss Bianca and Bernard are seen flying eastbound into the Atlantic Ocean during the song "Tomorrow Is Another Day."