The Mystery, Inc. gang visit a Halloween carnival on Halloween night. When the magician "The Amazing Krudsky" (voiced by Wayne Knight) does not allow Scooby to see his show, he and Shaggy accidentally expose Krudsky as a fraud during one of his acts, resulting in the gang getting kicked out of the carnival. The rebellious Fairy Princess Willow (voiced by Hayden Panettiere) later enters Krudsky's tent, where he secretly reveals his wishes to become a real magician. The fairy inadvertently causes Krudsky to notice her on the Goblin Scepter in a spell book, which can be combined with fairy magic to control Halloween. Krudsky then gets an idea to obtain the scepter and rule the world with it. Willow decides to toy with him, but while flying, she accidentally slams her small body against a metal chair knocking her out; Krudsky then crushes her with his flyswatter. When he notices her cry of pain from being crushed, he sees that she is a real fairy, kidnaps her, and absorbs her magical powers, thus becoming a real magician.

Meanwhile, Scooby-Doo and the gang go trick-or-treating all night. Shaggy's and Scooby's last stop is a spooky looking house which claims to be a "genuine magic shoppe". However, a very loud thunderstorm also begins, frightening the heroes. Inside, they meet the kind Mr. Gibbles (voiced by Wallace Shawn), who reveals that magic really does exist. At that moment, Willow enters being chased by Krudsky; he captures her and turns Gibbles into a rabbit, and steals the magic equipment before leaving. Mr. Gibbles explains to an astonished Shaggy and Scooby that Krudsky, after capturing the good magic of the princess, will now want the bad magic held in the scepter of the Goblin King, which will, as well, cause an imbalance in the supernatural order which will make Halloween remain forever and as a result will turn every human into horrifying monsters. Shaggy and Scooby board the Grim Reaper Railway which flies them to the spirit world. Once they arrive, the two realize that they need to get the scepter before Krudsky can, and return home before sunrise or else they will be trapped in the magic world forever. Before they depart, Gibbles gives them magic cards that perform spells just by reading the inscription on each one; however, they have to be saved for emergencies because each card can only be used once and each spell is temporary. To make it less suspicious-looking, Shaggy and Scooby are magically disguised by being transformed into monster-like versions of themselves.

Scooby-Doo! And The Goblin King