Plot
In the town of New York City, Casper and his cousin Spooky are getting lessons from their uncles the Ghostly Trio: Fusso, Lazo, and Fatso as they demonstrate by scaring a local family on the subway. Casper doesn't understand why, so in a school of Spookytown, the Trio inform him that they must keep the scares in Ghostburg intact in order to keep the monstrous Volbragg contained. Casper assumes that he is just a myth, so the Trio explain to him and Spooky the origin of Willem George Volbragg, a power-hungry mad politician in the 1600s who wanted to rule New Amsterdam and terrorize the townspeople, but the townspeople had him sunk in into the bottom of the river, leaving him for dead. Volbragg ended up in Spookytown and decided to take it over instead which gives him this massive power by a witch that was able to use the magic spells to collect the scares in Spookytown that is converted into an energy source in order to make him bigger and more powerful and would destroy any race that has the least scares. This led the more intelligent ghosts and witches, to capture Volbragg and used his scare power to collect into prison and must channel the scare energy to keep him contained.
Meanwhile, Casper decides to fly around Spookytown thinking to see if there is another way to keep Volbragg contained rather than just scaring others. He wanders around town looking at other groups in Spookytown. He stumbles upon a group of witches who were terrorizing citizens, where a young little witch girl interferes, as she is not pleased with her aunts scaring others for their amusement, even though they explained to her that they must keep Volbragg contained. She had all the humans disappear except for one boy, whom Casper unintentionally scares off which leads the young boy back home also causing Casper to meet the young witch who thanked him for helping the boy get home. The witch is named Wendy and seeing how similar she is to him, Casper befriends her, and they spend most of the time hanging out, learning about one another.
One day in Deviland, they encounter a trouble-making young devil name Hot Stuff who pulled a prank on the ogres and has Casper and Wendy take the blame, where the ogres have captured them in a net that even with their powers they can't be able to fade through. Hot Stuff decides to save them by pretending to be a mud monster and demands the ogres to let them go and entraps them with the net. After Casper, Wendy and Hot Stuff escape the ogres, Casper and Wendy offer Hot Stuff to join them which he reluctantly agrees to since he can relate to the idea of not being wanted. With Hot Stuff as their new friend, Casper and Wendy decides to show Hot Stuff around teaching him how to be nice as Hot Stuff shows the two of his race of demons. The three encounter a werewolf, who threatens to eat Hot Stuff. Although Casper tries to save him, by scaring the werewolf, the werewolf is not intimated by him and finds his attempt to scare him amusing.
The three escape and go into their hideout where they are caught and punished by their elders for hanging out with each other; therefore, they are forbidden to see each other again. Meanwhile, scientists attempt to learn about the other world, and collect its energy source, but the machine they use is taking away their energy and lets loose ghosts, ghouls, and goblins terrorizing their world and weakening the prison's hold that contained Volbragg which wakes him up and goes on a rampage to rule all of Spookytown. Casper, Wendy, and Hot Stuff reunite and witness the chaos as the many ghosts and ghouls were running from the monstrous beast. Casper believes that he is lonely and all he wanted was to be accepted, but Wendy and Hot Stuff think that he has lost his mind, which leads to a huge argument between Casper and Wendy, ultimately ending their friendship as Hot Stuff was left all alone. Hot Stuff runs into the scientists who told him what had happened and tried to stop it, but they can't. Hot Stuff flew off to find Casper and Wendy. Meanwhile, Wendy finds the witch that gave Volbragg the magic spells who then, in turn, gives Wendy her old wand that can take Volbragg's magic away. Casper goes to Volbragg thinking that he can try to reason with him, but is interrupted by Hot Stuff and Wendy which gives Volbragg the impression that Casper is setting him up.
The three go into the scientist's lab as it is revealed that Volbragg is getting his energy from the electricity from the human world. With that being said, Casper insists on using dampening dust the professor gave him to cope with Volbragg while Wendy would use the wand the witch gave her to take Volbragg, but Volbragg has proven to be too powerful for Casper until Hot Stuff uses balloons covered in white sheets that has faces on it in which he uses to pull the prank on the ogres, to distract Volbragg, as he is losing power and energy which gives Wendy the opportunity to use the wand against him. It turns out that Volbragg has the power of being a part ghost, part witch, part devil as Wendy has to say three phrases three times to use the magic and take away his powers. Just as a huge brick is about to fall onto her, Hot Stuff pushes her out of the way to save her, giving him the self-sacrifice by getting knocked over by the brick instead.
Later, everyone in Spookytown moans for Hot Stuff's apparent death, but it is revealed by his parents that the only way to bring him back to life is by dumping him in the fire. He rises up from the fire with everyone cheering that he is alive and they all congratulate Casper, Wendy, and Hot Stuff on defeating Volbragg giving Hot Stuff the idea of having a party to celebrate, as it is the friendship of the three that band together in defeating Volbragg for good.
