Sora, Donald, and Goofy find themselves in the world of Halloween Town, where they have been given appropriately spooky costumes. They quickly encounter some Heartless in the town square, but much to their surprise, the Heartless don't seem hostile at all. Instead, they appear to be assisting Jack Skellington, the Pumpkin King, and the Mayor of the town with their preparations for Halloween. It seems that Jack wants the Heartless to dance in their annual celebration. Sora, Donald, and Goofy follow Jack into Dr. Finkelstein's lab, where they see the mad scientist working on a Heartless. Jack comes to the conclusion that he needs to use a heart to control the Heartless. Finkelstein assures him that he can make one, but the container for his artificial heart is locked. Sora, who also wants to see the Heartless dance, decides to use the Keyblade to unlock it for them.
Jack thanks Sora for his help and asks him to participate in Halloween. Finkelstein tries to use the heart, but the experiment goes awry. The doctor realizes that he's missing one key ingredient: memory. His assistant Sally has some memory, but she's nowhere to be found, so Sora decides to go with Jack and find her. As soon as they step outside, the Mayor announces that Finkelstein's experiment has made the Heartless become hostile.
After dealing with the Heartless, they travel to the graveyard, where Jack's dog Zero leads them to Sally. She gives Jack the memory he needs, in the form of a forget-me-not, but she tells him that she thinks the experiment isn't a good idea. Jack assures her that everything will be fine and returns with his new friends to the lab. Meanwhile, the three naughty children, Lock, Shock, and Barrel, who were eavesdropping on the conversation, decide to tell their boss, Oogie Boogie, who is part of Maleficent's council, about the heart.
Back at the lab, Finkelstein says that they actually need another ingredient: surprise. As they go to find the mayor, who helps them get it, Oogie Boogie is plotting to take the heart and use it to control the Heartless like Maleficent and the other villains. After they find the surprise, Finkelstein successfully creates the heart, but Lock, Shock, and Barrel appear and steal it to take it to their boss.
With the help of Zero, Jack and Sora chase the trio and their walking bathtub back to Oogie's Manor. Once there, they confront and punish the kids before confronting Oogie Boogie himself. Oogie eats the heart and tries to summon Heartless, but he is infuriated when only two of them show up. Sora and Jack battle Oogie Boogie and defeat him, causing his sack to unravel and reveal the bugs within. They begin to leave, but Oogie possesses his own manor and becomes a gigantic abomination. After defeating the boogeyman once more, Sora finds the Keyhole and locks it. Back in town, Jack apologizes for not listening to Sally, who assures him that they can find a better plan for Halloween. As Finkelstein ponders the true nature of the heart, Sora, Donald, and Goofy bid farewell to Jack and friends, heading for the next world...
