The Mystery Inc. gang visit a Halloween carnival in Coolsville on Halloween night. When the magician "The Amazing Krudsky" does not allow Scooby to see his show, Shaggy and Scooby expose Krudsky as a fraud, which got them kicked out of the carnival. Later, the rebellious Princess Fairy Willow enters Krudsky's tent, where he secretly reveals his wishes to become a real magician. The fairy inadvertently causes Krudsky to notice a entry on the Goblin Scepter in a spell book. The Goblin Scepter can be combined with fairy magic to control Halloween. Krudsky then gets an idea to obtain the scepter and rule the world with it. The fairy decides to toy with him, but while flying, the fairy 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, becoming a real magician.
Meanwhile, Shaggy and Scooby trick-or-treat all night. Their last stop is a spooky looking house which claims to be a "Genuine Magic Shoppe". However, a very loud thunderstorm also begins, frightening our heroes. Inside, they meet the kind Mr. Gibbles, who reveals that magic really does exist. At that moment, Willow enters being chased by Krudsky. Krudsky captures the Princess, 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 cause an imbalance in the supernatural order. Shaggy and Scooby must go into the world of magic via the Grim Reaper Railway, get the scepter before Krudsky can, and return home before sunrise or else they will the 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.
While looking for Shaggy and Scooby, Fred, Daphne, and Velma see Krudsky conversing with the Goblin King through a mirror, where the King agrees to exchange his scepter for Willow at midnight at a clock tower. However, seeing all the evil magic and the Goblin King in reality causes Velma's rational mind to shut down, Fred and Daphne leave Velma to rest in the mystery machine and go the tower to set a trap for the King and Krudsky. In the magic world, Shaggy and Scooby go to a bar owned by a werewolf and find that everyone is afraid of the Goblin King and will not help them. The Goblin King's two bumbling henchmen, Glob and Glum, attempt to capture Scooby and Shaggy, but they are saved by Jack O'Lantern, a living pumpkin who leads them to three witches (The Grand Witch, The Cat Witch, and The Owl Witch) while running away from the Headless Horseman. Along the way, they avoid the Headless Horseman (who was Jack's former body) by heading across a covered bridge which the Headless Horseman can't cross. The three of them arrive at the Witches' Hut where they meet the Grand Witch and her two fellow witches. The witches send Shaggy and Scooby on a ride on their flying broomstick named Broomy towards the Goblin King's castle, but they are shot down by Glob and Glum by a goblin gun-like cannon.
Landing in a fairy village, Shaggy and Scooby find three fairies (Honeybee, Tiddlywink, and Sparkplug) who help them to the Goblin King's castle entrance. Using a potion from the witches (made from someone called Scratch), Shaggy and Scooby disguise themselves as Daphne and Velma in order for Glob and Glum to let them into the castle. Only a few minutes away from midnight, Shaggy and Scooby try to run off with the scepter, but are caught and sent to the dungeon by the Goblin King who heads to meet with Krudsky. At the clock tower, Krudsky and the Goblin King are almost through with their trade when Fred and Daphne release a trap and run off with the princess. But the trap only catches the Goblin King and Krudsky takes the scepter, turning himself into the new Goblin King. After turning the Goblin King into a goose, Krudsky and his goblin army capture Fred, Daphne, and the now-awakened Velma, and he uses his powers to turn Fred into a vampire, Daphne into a witch and Velma into a werewolf (respectively). At that moment, Scooby, Shaggy, and Jack O'Lantern arrive, having been saved from the dungeon before sunrise by the fairies and the Broomy. Jack sacrifices himself to strip Krudsky of the staff which Scooby uses to break Krudsky's spells, restoring his friends and the Goblin King back to normal.
The Goblin King is revealed to be Willow's father, as he holds her responsible for the trouble that has been caused and punishes her for this and her selfishness, grounding her for a year; he, however, admits that he is relieved to have her back. Mr. Gibbles brings Jack back to life with the king's help. The Goblin King then takes Krudsky prisoner for both his crimes and treachery (where the Goblin King tells him that he'll have plenty of time to "work on his act") as he returns to the magic world, alongside the goblin army, Willow, Jack, Broomy, and Mr. Gibbles. To keep the balance between the worlds, the Goblin King also uses one final spell to erase the memory of the events from Fred's, Daphne's, and Velma's minds; however, Scooby and Shaggy are allowed to keep theirs as they have proven their courage. As morning comes, Fred, Daphne, and Velma forget what transpires (due to the effects of the memory-erasing spell) as Shaggy and Scooby-Doo come to pick them up.
- Fairy Princess Willow (single appearance)
- Mr. Gibbles (single appearance)
- Jack O'Lantern (single appearance)
- Honeybee (single appearance)
- Sparkplug (single appearance)
- Tiddlywink (single appearance)
- Cat Witch (single appearance)
- Grand Witch (single appearance)
- Owl Witch (single appearance)
- Amazing Krudsky (single appearance)
- Glob (single appearance)
- Glum (single appearance)
- Boneyard Werewolf (single appearance)
- Goblin King (single appearance)
- Monstrous Machine (single appearance)(no lines)(transformation)
- Monster bar patrons (single appearance)(miscellaneous speaking)
- Magic world
- The Mystery Machine
|Song||Credits||Performed by||Character performance by|
|"Who's At the Door"||Credits||Wallace Shawn||Mr. Gibbles|
|"Bump in the Night"||Uncredited||Uncredited||Various monsters|
|"Goblin Oogie Boogie"||Credits||James Belushi||Glob|
- In this movie and the following, Daphne's robe-like top introduced in the What's New, Scooby-Doo? episode, There's No Creature Like Snow Creature, has been redesigned to be a regular top with a V-neck.
- The book Krudsky looks at when he captures the fairy has a picture of Fangface, a lesser known Hanna-Barbera detective.
- At the amusement park, the Monstrous Machine crashes into a stand full of stuffed toys of Scrappy. Even though Scrappy himself doesn't appear, this is the only time he's used in a DTV film.
- It was dedicated to Paulette Oates, whom helped resurrect Warner Bros. Animation in the late 1980s.
Hidden monsters from previous series/film
In the scene where Shaggy & Scooby-Doo enter the monster bar, in the part where all the monsters sing, some of the monsters from the cartoons, are part of the group:
- The Werewolf from SDWAY: Who's Afraid of the Big Bad Werewolf
- A Phantom Shadow from SDWAY: A Night of Fright is No Delight
- The Creeper from SDWAY: Jeepers, It's the Creeper
- The Mummy of Ankha from SDWAY: Scooby-Doo and a Mummy, Too
- A blue version of the Roller Ghoster from WNSD: Roller Ghoster Ride
- Snow Ghost from SDWAY: That's Snow Ghost
- Ghost of Mr. Hyde from SDWAY: Nowhere to Hyde
- The No-Face Zombie from TSDS: The No-Face Zombie Chase Case
- Penguin's Troll disguise from TNSDMovies: The Caped Crusader Caper
- A Kelp Monster from TSDS: Scooby-Doo, Where's The Crew?
- Specter of Ebenezer Crabbe from TSDS: High Rise Hair Raiser
- The Ghost of Haldane from SD&SD (1st series): The Sorcerer's a Menace