Scooby and the gang travel to Sierra Fantasma, Mexico, where the ghost of a bank robber is terrorizing the town and destroying the buildings one-by-one. Scooby follows an old man, who is selling talismans to protect against the ghost, and discovers the phony ghost's hideout.
He returns to town and sniffs out the explosives in the Banuelos Hotel. The gang diffuses the bomb and capture the fake ghost. Shaggy dons the ghost outfit and tricks the other two criminals -- one of whom turns out to be the real Enrique Ladrón, now 105 years old -- into revealing their whereabouts.