The gang is on a boat heading for a island for the reading of a will. It is a creepy night and there is thunder and lightening. Scooby had rescued Colonel Sanders from a fishpond and was in his will. Problem is, to get his part of the will, he would have to spend the night in the Colonel's haunted mansion.
A butler comes to greet them and ushers them into the house. The Colonel's lawyer, Cosgoode Creeps tells the heirs and Scooby that the only instructions from the Colonel was to play a record. The Colonel tells them they must stay the night to get the fortune, so the whole gang decides they'll stay with Scooby. Fred, Shaggy, and Scooby are getting ready for the night. Fred and Shaggy are in the bedroom while Scooby decides to take a bath. Fred tells Scooby to hurry up and he is scrubbing up when a ghost appears from a tile trapdoor. The bathtub slides out of the room for a moment, dumping Scooby onto a chute into the basement. He is on a pile of coal, when he sees a chain rattling phantom. He runs up the stairs to tell Shaggy and Fred what just happened to him. Fred and Shaggy don't believe Scooby. They all go to get some sleep.
The clock chimes midnight and two green ghosts go into one of the cousins rooms. The gang wakes up and finds Cousin Simple gone and a message telling them to leave the island on the mirror. The gang decides to rig up a dummy of Scooby Doo to catch the ghost when he comes to grab the dummy. Scooby and Shaggy are watching from outside on the drainpipe, when the ghost knocks the drainpipe loose. Velma tries to help them, but gets pulled out of the window, too. Shaggy, Scooby, and Velma all land in a cave below the house when the drainpipe finally breaks.
They find themselves in a cave that is a secret passage underneath the house. They find the Phantom Shadow's footprints and decide to follow them. The footprints lead to a room with a stash of Civil War relics. They find a wagon full of uniforms, when one starts flying and chasing them. It corners them in a elevator and Scooby starts scaring it, and it happens to be a duck and flies away scared. They go up in an elevator and it leads them to Cousin Slicker's room. They get out of the elevator to find Cousin Slicker gone along with all the rest. Scooby is the only remaining heir. They hear organ music so they go to check it out, but whoever was playing the organ earlier is gone.
They see a music book with writing on it. It says 'feed the organ and watch the floor,' but the gang doesn't understand what it means. Scooby starts playing and the walls start closing in on the group and the door has locked. Scooby continues to play the organ trying to stop the walls, and it finally works. They figure out the riddle and the floor moves. The gang follows the secret stairs down to the catacombs. They find five coffins and one of them is empty and dog shaped. They see the Phantom Shadow and then another one appears and they all run as fast as they can. Scooby faints, but a Scooby Snack revives him. They continue running and finally hide in the chandelier, but the ghost cuts it and it falls to the floor. Scooby and Shaggy find a wine rack and use the corks as ammunition against the ghosts. They continue trying different ways to get away from the green ghosts, and they meet up after they ditch them.
They all head to the laundry room and set up their trap for the ghosts. Scooby accidently trips the trap too soon and in reverse, leading to a flying washing machine. They take the flying machine out the door and go into the cave. The ghosts who were running away are caught by Shaggy and Scooby and fall into the washing machine and it happens that Mr. Creeps and Mr. Crawls, the lawyers are to blame for it all.