Mystery Inc. attends the annual Coolsville Halloween carnival, where they encounter a magician called "The Amazing Krudsky". After he refuses to let Scooby-Doo see his latest show for causing an accident, the former and Shaggy Rogers retaliate by publicly exposing Krudsky as a fraud, causing him to swear revenge while the gang are thrown out of the carnival. Nonetheless, they decide to go trick-or-treating instead.Meanwhile, Fairy Princess Willow enters Krudsky's tent and accidentally reveals the existence of a powerful artifact called the Goblin Scepter. When he decides to find it and use it to take over the world, Willow tries to stop him, but knocks herself out, allowing Krudsky to capture her and absorb her magic to become a real magician.Shaggy and Scooby head over to a magic shop where they meet Mr. Gibbles. He is interrupted by Krudsky who recaptures Willow and turns Mr. Gibbles into a rabbit, also stealing his equipment. Gibbles urges Shaggy and Scooby to stop him, grants them monstrous disguises, sends them to the spirit world, and warns them to return before sunrise lest they be trapped there forever. Upon their arrival, the pair struggle to find the Goblin Scepter's owner, the Goblin King, but eventually encounter Jack O'Lantern and the Grand Witch, who uses her flying broomstick "Broomy" to transport them to the Goblin King's castle, only to be shot down by the monarch's bumbling henchmen, Glob and Glum. They crash land in a fairy village, and fairies help Shaggy and Scooby get to the Goblin King's castle.Elsewhere, the rest of Mystery Inc. discover Krudsky conversing with the Goblin King, who reluctantly agrees to exchange his scepter for Willow, his daughter, at midnight. As Krudsky engages in supernatural chaos, Velma Dinkley faints from being unable to comprehend the events while Fred Jones and Daphne Blake formulate a plan to stop the trade. Meanwhile, Scooby and Shaggy try to find their way in. They use the potions from the Grand Witch to gain new identities. Eventually, the goblins start to perform "Goblin Oogie Boogie" with just enough time for Scooby to get the specter, but fails when his wig falls of his head. They get captured and thrown in the dungeon. But they are saved by Jack, the fairies, and Broomy. When midnight arrives, Fred, Velma, and Daphne spreads their trap to catch Krudsky but accidentally captures the Goblin King. Krudsky snatches his specter and turns into a goblin and turns the Goblin King into a goose.He sends a portal to lead an army of goblins to attack and turns people into monsters. He also turns the Mystery Gang into monsters: Velma a werewolf, Fred a vampire, and Daphne a witch. Soon, Shaggy and Scooby come to save the day. They throw Jack to Krudsky to sacrifice himself. Scooby-Doo grabs the specter and undoes Krudsky's doing.In the end, the Goblin King is transformed back and grounds Willow for a year. He takes Krudsky as prisoner and opens a portal sending everyone back to the spirit world. He erases the Mystery Gangs minds but not Shaggy and Scooby since they proved courage. They enjoy the carnival but the Headless Horseman appears in the portal and Shaggy gets scared but turns out to be Scooby as he says his catchphrase, "Scooby-Dooby-Doo!"