Puff the Magic Dragon in the Land of the Living Lies (1979)

Sandy is a little girl with a penchant for whoppers. However, when her lies start go so far as to implicate the innocent for her own misdeeds, Puff decides to step in. Using his magic, Puff takes Sandy to the Land of Living Lies where everyone tells the most ridiculous lies and honesty is persecuted. Only when Sandy realizes the need for honesty can she help Puff escape this insane world.