In a tower, a girl named Rapunzel is staring out of a window into the sky, watching a stream of bright lanterns floating into the night. She says that they only appear on her birthday, which makes her think that they were made for her. As a result, she longs to see the source of these lanterns for herself. This tower is located in a country called the Kingdom of Corona, which Sora, Donald, and Goofy reach during the day. They meet a man under attack by some Heartless, so they fend them off. The man introduces himself as Flynn Rider and sneaks away while the trio is fighting. After the battle, they find a secret cave while searching for him, and the cave leads them to Rapunzel's tower.
Inside the tower, Flynn has been captured by Rapunzel in her extremely long hair. She tells him that she took a satchel that belongs to him. When he tells her that he doesn't want her hair, she agrees to return the satchel if he takes her to see the lanterns. Flynn initially refuses, but he changes his mind after he realizes he can use Sora and friends to his advantage. When they reach the base of the tower, it quickly becomes apparent that Rapunzel has never left the tower before, much to the others' confusion. Flynn climbs down with Rapunzel and tells them that he wants to take her to the kingdom to see the lanterns, so they agree to help. While on their way, they encounter some Heartless, which initially scare Rapunzel, but she musters up her courage and helps them fight.
Meanwhile, back at the tower, a black-haired woman named Gothel arrives, only to be horrified after realizing that Rapunzel is gone. She begins to panic, and while searching through the tower, she finds Flynn's satchel. Inside is a tiara belonging to Rapunzel and a wanted poster with Flynn's face on it. Gothel begins to despair of ever finding Rapunzel, but she is confronted by Marluxia, who now has Xehanort's golden eyes to signify his joining the true Organization XIII. He offers to help her find Rapunzel, but he corrupts Gothel and turns her eyes pink as he does. Shortly afterwards, Sora and friends are attacked by Reapers, a type of Nobody under Marluxia's control. Seeing them makes Rapunzel begin to think that her mother, who warned her about the dangers of the outside world, was right. Sora, Donald, and Goofy urge Flynn and Rapunzel to flee while they fight the Nobodies.
After the Nobodies are destroyed, Marluxia appears and re-introduces himself to Sora, who has no clue who he is due to forgetting the events of Castle Oblivion. Marluxia tells Sora that Rapunzel has a heart of pure light and asks him to protect her from the darkness of the world. He says that the Organization's goal is to complement the light, not to fight it, before vanishing. Later, the three friends reach a swamp, where Gothel spots them. She initially decides to ignore them, but after hearing Sora call out Rapunzel's name, she approaches them and introduces herself as Rapunzel's mother. She tells them that she's been extremely worried because her daughter left home without telling her. They tell Gothel that they lost Rapunzel, much to her annoyance. Sora offers to help Gothel look for her, but she dismisses the offer and leaves them.
After making it out of the swamp, Sora and the gang find Rapunzel and Flynn, who have met a horse named Maximus. It quickly becomes clear to Rapunzel that Maximus is trying to hunt Flynn down, but she persuades him to leave him alone until they have seen the lanterns. They soon reach the capital of the kingdom, where Rapunzel sees a mural depicting the king and queen holding a baby. A little girl leaves a flower by the mural, saying that it is for the lost princess. Rapunzel looks more closely at the mural and realizes the baby looks like her, but she gets distracted when a festival dance begins. After participating in the dance, a man announces that the lanterns are going to be released soon.
That night, Rapunzel and Flynn watch as the lanterns rise into the sky. Rapunzel is ecstatic to finally see the lanterns in person; meanwhile, Flynn begins to feel guilty for the fact that he had started the journey for his own selfish purposes. After they return to the shore, Flynn runs away to go do something. Elsewhere, Sora and friends are attacked by some Nobodies in the middle of the festival. While they are busy fighting, Rapunzel sees Flynn, whom she refers to as "Eugene," seemingly sailing away with her tiara in his hand; in actuality, however, he is unconscious and tied to the ship with some ropes. Marluxia appears and tries to convince Rapunzel to come with him, summoning some Nobodies as he does. She runs away in fear, but her hair gets stuck on a log. She manages to get hair her unstuck, but then she hears Gothel's voice from where Marluxia was. She approaches and sees that Gothel has seemingly destroyed the Nobodies. Gothel urges her daughter to come home before the Nobodies return. Rapunzel looks back out on the lake and despairs over the fact that Eugene is gone. Gothel offers her a hug, which she gladly accepts. Together, Rapunzel and Gothel make their way back to the tower.
Sora and friends see Rapunzel leaving with Gothel, but Marluxia stops them before they can catch up. He reveals to them that Rapunzel's hair has magical healing properties, which could potentially attract evildoers to her. He also tells them that Gothel herself is one of these evildoers; she only cares about Rapunzel for her hair and its powers. Nevertheless, though Gothel's motivations may be selfish, as long as Rapunzel stays in the tower, no harm will be done to her, which benefits the Organization. Marluxia explains that, if they fail to find seven Guardians of Light, then the Organization will be forced to use the "New Seven Hearts" instead. After the original Princesses of Heart fulfilled their duty during Sora's first adventure, their powers were passed on to a new set of princesses, of which Rapunzel is one. Sora tries to attack Marluxia, but he casts a spell that puts him to sleep, remarking that he was always "such a sound sleeper."
Back at the tower, Rapunzel is looking at a cloth she got from the festival. The cloth is emblazoned with a sun, the symbol of the Kingdom of Corona. She looks up at the ceiling and finds it filled with suns as well. Suddenly, she thinks back to the mural she saw, remembering that the baby on the mural looked like her. Rapunzel suddenly realizes that she is actually the lost princess of the kingdom, meaning that Gothel is not her real mother. She confronts Gothel about the truth, knocking over a mirror in the process, before attempting to leave to go find Eugene. Before she can, though, Gothel begins to glow with darkness as she tries to stop her "daughter." Later in the morning, Eugene manages to escape, and he and Maximus find Donald and Goofy tending to an unconscious Sora. He has Maximus lick Sora, which wakes him up. They begin to make their way to the tower, but they are stopped by some Nobodies. Sora, Donald, and Goofy stay behind to fight them while Eugene goes ahead.
Eugene reaches the tower, where he finds Rapunzel bound and gagged. Gothel stabs him with a knife, knocking him down. As Rapunzel tries to struggle, her gag falls off, allowing her to speak. She tells Gothel that she will stay with her for the rest of her life if she lets her heal Eugene. Gothel agrees to the deal, but she chains Eugene up to prevent him from trying anything. Rapunzel tries to heal Eugene, but before she can, he takes a shard of the broken mirror and uses it to cut her hair, nullifying its powers. Gothel begins to panic as she suddenly gains centuries' worth of age. Horrified by her own appearance, she covers herself with her hood, which prevents her from seeing where she is going. As she stumbles around, Rapunzel's lizard friend Pascal grabs the cut hair and uses it to trip Gothel, causing her to fall out the window.
Sora and friends reach the tower just as Gothel is falling out of it. Marluxia says that she has fallen to darkness, meaning that they can't let her near Rapunzel anymore. To prevent her darkness from becoming stronger, he turns her into a Heartless called the Grim Guardianess. After a fierce battle, Sora and friends manage to destroy her. Inside the tower, Rapunzel tries to perform the healing incantation, but to no avail. She sheds a tear, and when it falls onto Eugene's face, it activates a powerful spell that heals him. Later, Rapunzel and Eugene tell the trio that "Flynn" was actually a pseudonym; his real name is Eugene Fitzherbert. With no sign of Marluxia, the kingdom is safe for now, so Sora and friends take their leave. Meanwhile, Maleficent and Pete, who had been scouring the world for the black box, have had no luck, so they decide to leave and take their search elsewhere.
Back in Radiant Garden, Mickey and Riku are asking Ienzo about the Replica Program. He informs them that the program's creator, Even, has gone missing; Aeleus attempted to find him, but there was no trace of him. They wonder if he could have used a dark corridor, but if he became human again, Even should be unable to open them. Riku realizes that if he can't use a dark corridor, then the only way he could have left the world would be if someone who can use one, i.e. an Organization member, took him. The Organization would certainly have use for the replicas, so they decide to go warn Yen Sid and Sora about the potential threat.
Meanwhile, in the Keyblade Graveyard, Saïx is speaking with the former Even, who has given up his humanity and become a Nobody again in order to rejoin Organization XIII, thus becoming Vexen again. Saïx is shocked that he would willingly give up his heart and return to being a Nobody, but Vexen assures him that his death at Axel's hands taught him where not to put his trust. He further says that all he cares about is his research, stating that humanity means nothing to him. Vexen says that his one goal is to complete the replica program at any cost, and Saïx says that they need him in order for them to acquire their final vessel. Vexen laughs as he removes his hood, revealing that he now has Xehanort's golden eyes as well...
