Back in the world of Atlantica, Ariel is swimming above water after a storm, when she spots a prince named Eric stranded at sea, clinging to a piece of driftwood. She takes him to the shore and sings to him, but she quickly flees when he begins to wake up. When he comes to, he begins recalling her voice, while two familiar eels watch from the distance.
Sora, Donald, and Goofy find themselves back in their aquatic forms, where they reunited with Ariel, Sebastian, and Flounder. Since they haven't been in those forms for a while, they have to get a short swimming lesson from Flounder again to get readjusted. Afterwards, Ariel tells them that there's a musical coming up, and she invites the trio to participate. After a rehearsal, King Triton shows up and tells Sora that he needs his help. Ariel has been getting obsessed with the human world again, so he thinks if he keeps her busy, he can distract her from thinking about the surface. Meanwhile, Eric returns to the beach where Ariel saved him and hears her voice echoing from the rehearsal, but she's nowhere to be found.
In an attempt to cheer Ariel up, her friends find a statue of Eric in the wreckage of his sunken ship, and they bring it to her grotto. Ariel sings as she expresses her desire to visit the human world. Next, Sora, Donald, and Goofy join Sebastian in singing the song "Under the Sea" in the hopes of convincing her that life is better underwater, but it doesn't help her feel better. As everyone else leaves, Sebastian talks to himself about Ariel's situation, not realizing that Triton was right behind him.
Ariel finds a pendant of Eric's, but she can't reach it on her own, requiring Sora's help. Back in the grotto, she plans to give it back to him, but Triton appears and destroys Eric's statue in a rage. In the midst of her sadness, the eels Flotsam and Jetsam approach her. The two of them summon Ursula, who somehow managed to return after her previous defeat. She makes a new deal with Ariel: she will turn the princess into a human, and if she manages to share a kiss of true love with Eric before three days are up, she will remain a human forever. However, if she fails to get that kiss, her life will belong to Ursula. Additionally, Ariel must also give up her voice as payment. Ariel is reluctant to take the deal, but the sea witch baits her into accepting by pretending that she is about to leave. Ariel signs the contract, and Ursula turns her into a human as she takes her voice with a shell-shaped necklace. Sora and friends try to stop Ursula, but they're too late. They take Ariel to the surface so she can breathe.
Ariel wakes up on the beach, where Eric finds her. She gives him the pendant Sora retrieved, and Eric takes her back to his castle. Meanwhile, Sora and the gang try to track down Ursula, but they can't find a single trace of her. On the night of the second day, Ariel and Eric go out on a small boat together. They nearly kiss, but Flotsam and Jetsam stop them by rocking the boat.
On the evening of the third day, Sora, Donald, and Goofy, still haven't found Ursula. They see Ariel alone and crying on the beach. They then see Eric with another woman, one who has Ariel's voice. Flounder notices that the woman has the shell necklace Ursula used to take Ariel's voice, so they realize it must be a transformed Ursula. Sora uses the Keyblade to destroy the necklace, giving Ariel her voice back. Eric realizes Ariel was the girl who saved him, but it's too late. Ursula, now back in her true form, points out that the sun has already set. She crawls down the beach and grabs Ariel, taking her back into the sea.
Back underwater, Sora and the gang see Ursula and Ariel, who has now been turned back into a mermaid. Triton appears and tries to attack the sea witch, but the binding contract cannot be broken, even by the king of the sea. Triton decides to take his daughter's place so she can go free, signing his name over hers. He turns into a tiny polyp, allowing Ursula to take his trident once more. Just as the sea witch is celebrating her victory, she is hit with a dart by a diving Eric. Ursula tries to send Flotsam and Jetsam after him, but Sora and friends stop them. Ursula grows to gigantic proportions and battles the group alongside the eels. They manage to destroy Flotsam and Jetsam, and Sora swats the trident out of her hands, sending it hurling into Eric's boat. He takes it and throws it at Ursula, impaling and killing her.
Eric tries to comfort Ariel, but she reveals that she is a mermaid to him. She assumes he would hate her for not telling the truth, but he still loves her. Everyone performs the musical as planned, causing a giant bubble to appear. This bubble turns out to possess the gateway to the next world, which Sora promptly unlocks. With that, they bid farewell to their aquatic friends and continue their journey...
- Ability Required to Proceed: The events of Atlantica are split into five parts, with each new one being unlocked as the game advances.
- Swim This Way: Clear Timeless River.
- Part of Your World: Obtain the Magnet spell by defeating Oogie Boogie in Halloween Town. In-game, it is because a statue of Eric is trapped under a shipwreck, and the party can't lift it.
- Under the Sea: Boost the Drive Gauge to 5 by defeating the Hostile Program in Space Paranoids. Done because the song in question is somewhat complicated for Sora to sing, so he would need time to practice.
- Ursula's Revenge: Obtain the Magnara spell by defeating the Grim Reaper in Port Royal. Eric had dropped his pendant in-between some rocks, and the party can't reach it or draw it out with a regular Magnet spell.
- A New Day is Dawning: Obtain the Thundaga spell by defeating the Groundshaker in the Pride Lands. No reason is given for needing the spell, but it's likely Sebastian wanted more time to set everything up.
- Be Careful What You Wish For: Ursula simply wants Eric to hand the trident over to her. He complies... by throwing it through her torso as a javelin.
- Bound and Gagged: Flotsam and Jetsam restrain Sora by wrapping themselves around him during "Ursula's Revenge" to keep him from interfering. Donald and Goofy free him, and the two eels are vanquished by a Blizzara.
- Breather Episode: The world lacks Heartless or Nobodies to fight, and instead functions as an episodic Rhythm Game sidequest. Also, "Under the Sea" takes place right after the Battle of the 1000 Heartless, and "A New Day is Dawning" (along with the second episode in Space Paranoids) is set before the storming of the Castle That Never Was.
- Company Cross References: Ariel's first encounter with Eric plays out similar to the opening scene of Pirates of the Caribbean: The Curse of the Black Pearl, where Elizabeth finds Will adrift at sea after a shipwreck. Also, the pendant subplot is also based on Will's pendant from the film (which this game also adapts), only Eric lost his by accident while Elizabeth stole Will's so he wouldn't be executed as a pirate.
- Dies Differently in Adaptation:
- In the film, Ursula accidently kills Flotsam and Jetsam through friendly fire when Ariel stops her from firing at Eric with the trident. Here, Sora kills them both with a well-timed Blizzara after his friends save him from being strangled.
- Also, Ursula dies by impalement in both the film and game, but while she was impaled by a shipwreck and electrocuted in the film, here, Eric javelins the trident through her.
- Impaled with Extreme Prejudice: Eric javelins the trident through Ursula when she demands he hand it over. This was originally how Ursula was suppose to die in the film, before Die Hard inspired Katzenberg to change her death.
- Kill It with Ice: Flotsam and Jetsam are finished off with a Blizzara from Sora during "Ursula's Revenge".
- Riddle for the Ages: How did Ursula get revived? Did Maleficent do it like she did with Oogie Boogie (with more success)? Was Organization XIII involved? Or was she merely a phantom created by Organization XIII to turn Triton into a Heartless and Nobody?
