Scooby-Doo and the gang travel to Camp Little Moose, Fred's old summer camp, to vacation and serve as camp counselors. But when they arrive they find the camp empty save for Burt, the head counselor, and the local Forest Ranger, Ranger Knudsen. They discover that one of the camp's old legends, the Woodsman, has come to life and scared the kids away. Ranger Knudsen suggests Burt close the camp before leaving. Burt is about to heed the Ranger's advice when three kids, Luke, Trudy, and Deacon, arrive at the camp. Fred convinces Burt to keep the camp open until the Mystery Inc. gang discover what's going on. But the gang and the kids are soon attacked by the Woodsman. The next day, everyone decides to spend the day at Big Moose Lake, home of the rich and modern Big Moose camp. The gang is enjoying their time at the lake until they are attacked by the Fishman, another camp legend come to life. During the chase, Scooby-Doo discovers a building at the bottom of Big Moose Lake. Everyone is now very scared, especially Deacon.
That night, Jessica, Camp Big Moose's head counselor, asks the gang if Camp Little Moose is pulling a prank on Camp Big Moose, explaining that an RV and some sonar equipment are missing from the camp. The gang wonders what purpose the equipment would serve for the Woodsman or the Fishman. Velma uses the RV's tracking device to locate it at Shadow Canyon, where Burt explains resides the Spectre, another camp legend. Everyone splits up; Fred, Daphne, Jessica, and Luke go investigate the building in Big Moose Lake, and Velma, Burt, Trudy, Shaggy, Scooby, and Deacon head to Shadow Canyon. After being chased by the Fishman, Fred and the others discover a whole town in the Lake, as well as some dynamite hidden in a cavern. Velma and company discover the missing RV and sonar equipment in Shadow Canyon. They find the sonar equipment is being used to scan the lake. Then, they are chased by the Spectre.
Everyone meets back at Camp Little Moose to go over what they found. Deacon decides he has had enough and wants to go back to Camp Big Moose, and Jessica drives him. The Mystery Inc. Gang wants to know more about the underwater town, so they ask a local shop owner about it. He explains that the town is called Moose Creek, which used to be a mining town that was forced to be evacuated to create the dam and Big Moose Lake. But more importantly, the treasure of a notorious gangster named Ricky LaRue is said to still be buried there. Before his death, the gangster said to his cellmate that if the sun hits the town on the Summer Solstice, the location of the treasure will be revealed. The gang reasons that the dynamite will be used to destroy the dam and reveal Moose Creek in order for the monsters to find the treasure, as the next day is the Summer Solstice. But doing this will flood Camp Little Moose. The gang returns to the camp to find that the Woodsman has laid waste to it, but Burt, Luke, and Trudy are safe. But the gang then realizes that if the Woodsman found nobody at Camp Little Moose, he would be free to destroy the dam. The dam then explodes, and everyone narrowly escapes in time.
Everyone then goes to Moose Creek, now exposed, to explore. There they find Jessica, who explains she was following Deacon. They are then attacked by the Woodsman, who chases Fred, Jessica, and Luke. The rest are found by Deacon, who, after having them locked up, reveals that he is not a kid, he is the criminal Babyface Boretti, Ricky LaRue's former cellmate who escaped from prison two months prior, who is looking for the treasure. After a long chase, the Woodsman is caught and revealed to be Ranger Knudsen, who is also the Fishman. The gang also capture BabyFace Boretti, who tries to escape with the treasure. Velma explains that BabyFace and Ranger Knudsen teamed up to scare away the kids at Camp Little Moose, explode the dam, and take the treasure. BabyFace posed as Deacon to try to convince everyone to leave. The two also used the sonar equipment to search for the town in the lake. In the end, Burt and Jessica merge the camps to form Camp Little Big Moose at Moose Creek, BabyFace Boretti and Ranger Knudsen are arrested, and the Mystery Inc. gang serve the remainder of the summer as camp counselors there. After the credits, it is revealed that the Spectre is indeed real.