Terra's hunt for Vanitas leads him to Disney Town, a place where Ven had given him a passport to earlier. As soon as he sets foot, he notices Unversed on a race track and prepares to stop them, but is nearly run over by a mysterious rogue racer named "Captain Dark" and saved by Queen Minnie Mouse.
Outside the track, Minnie, Chip, and Dale explain that Captain Dark is meddlesome troublemaker Pete, and is scheming to win an award: the town's Million Dreams Award. The town is also plagued by the Unversed, and Terra offers to stop them, but he has to obey the rules, and that means racing. To this end, Chip and Dale propose that Terra join the race. He does, and succeeds.
Afterwards, Terra learns from the experience that he does not need to give in to darkness to achieve his goals, and Chip and Dale are so impressed that they vote for him.
The following then occurs if the player has already beaten Ven and Aqua's stories first before Terra's. For the sake of convenience, Aqua is canonically the one to have received the Million Dreams Award.
Eventually, it's time for Minnie to announce the Million Dreams Award. She gives out a bag and reveals that the Million Dreams Award for best citizen goes to Terra, Ven, and Aqua. Terra is surprised that Ven and Aqua had already visited, but Pete is furious. Having schemed to win the award, he marches on to the stage to demand the prize from Minnie. But Minnie admits that although Pete did have some votes, he isn't the winner. Minnie then banishes Pete to the Lanes Between, and continues on with the ceremony by awarding Terra with Rockin' Crunch Ice Cream.
Meanwhile, Pete is broken out by Maleficent in return for helping her find the Princesses of Heart...