The episode opens with it being nighttime in Adventure Bay. Rubble is soon awoken by a hooting and falls into a freshly dug hole. When he emerges, he finds the hooting to be from Little Hootie. However, his attention is soon drawn to a weird "Shh..." noise, and spots what appears to be a ghost on the swing. Rubble is left spooked by the encounter as Little Hootie flies off.
The next day, Rubble explains what he saw last night to the other pups and Ryder, but they do their best to think Rubble was just seeing things. However, they are confused as to why all the toys are lying outside, even before they woke up. Although none of the other pups are certain about Rubble's claims, Rubble would soon find out he hadn't been seeing things...
That night, Rubble is awoken by the music from the Pup Pup Boogie game. When he goes to investigate, he finds the pup treats have been eaten as well, and he barely catches the ghost as it retreats back outside and disappears. Scared, Rubble jumps back into Ryder's arms, who had been awoken by the music as well as he's still in his pajamas. Deciding to investigate Rubble's ghost worries, Ryder summons the pups, who drowsily respond and enter the elevator, Rocky and Marshall tried to avoid all the toys lying out once more while Marshall gets everyone's dog bowls stacked neatly on his head. Marshall does end up riding Rubble's skateboard into the elevator and losing Rubble's bowl, but the rest remained neatly stacked on his head, much to his and the other pups' amusement. They head up, and Chase is decked out in his spy gear. Once topside, the pups are told of what's happening around the Lookout, and are further worried when they learn the pup treats are being eaten. Ryder assigns Rocky and Chase to help him out while, upon seeing the other pups yawn, sends them back to bed for some much needed sleep.
Once outside, Chase attempts to set up an ambush (but fails to hide his tail), while Rocky goes to put a trap together. However, Chase's ambush fails, as he mistakes Rubble for the ghost when picking him up with his night-vision goggles, following Ryder. Ryder accidentally sets off Rocky's trap, causing the pups to mistake him for the ghost. Soon, they hear the Pup Pup Boogie game again, and go to investigate. Even more spooky, the icon of the pup player on the screen looks like a ghost as well. Ryder decides to call the whole team in and wakes up Skye, Zuma, and Marshall again.
When Skye and Zuma arrive to regroup with the rest of the team, Ryder notices Marshall conspicuously absent. Thinking he's still in his pup house, they go to check, only for Skye to gain everyone's attention when she spots the ghost herself! As the ghost floats past, it trips over a teddy bear, revealing it to be none other than Marshall, suffering from a very bad case of sleepwalking. As Marshall sleepwalks away on Rubble's skateboard, Rubble quipping about how much better Marshall is sleepwalking than he is awake, Ryder and Chase give pursuit. An attempt to stop Marshall with Chase's zipline fails, and Marshall soon steers onto the dock, heading for the water. Ryder calls Zuma, who's soon on scene in his hovercraft, and watches as Marshall steers the skateboard to the other side of the dock. He falls off the side and lands on a surfboard, and starts riding that while the skateboard falls into the shallow water.
Marshall soon steers the surfboard onto the back of the mother whale, and the whale starts to carry him out to sea. Luckily, a seagull trying to avoid colliding with Marshall lets out a cry that finally wakes Marshall up to discover that his dream he was having was in fact real. He slides off the Mother Whale and back onto the water, but starts to panic as he tries to keep his balance on the surfboard. Luckily, Zuma fires his buoy to Marshall to hop onto, and Zuma pulls him back to the beach, where he soon is bumped out of Zuma's buoy and lands in the sand.
Once Ryder and Chase arrive, they explain everything to Marshall, and return home to the Lookout to tell the other pups. It looks like the mystery is solved, until they hear the "Shh..." noise again, only to see it was Rubble after springing the ghost trap again, enjoying the giant cookie that was used as bait. Everyone laughs as Rubble devours the rest of the cookie, and the episode irises out on Rubble's munching, smiling face.