Scooby and Shaggy are enjoying a luau, courtesy of John Sims, a local reporter who is giving them a tour of the Hawaiian islands. Shaggy is not looking forward to tomorrow's destination, though: a haunted village in the mountains. Mr. Sims is taken aback: that's not part of his tour, and he warns Shaggy against going up into it. Just after he delivers this warning, ghost drums begin to beat and a frightening, masked figure appears: a witch doctor warning them to leave the sacred grounds of Mano Tiki Tia. The villagers scatter, and Shaggy finds himself alone.
Shaggy races to a local hang out where he finds Freddy and girls; he tells them of the apparition and the disappearance of everyone—including Scooby and Mr. Sims. Returning to the scene of the luau, the gang find Scooby hiding inside a drum. They also spot an old man, who suddenly vanishes. Following a set of footprints, they find themselves up in the haunted village, where they are separated from each other by trapdoors. Shaggy, Scooby, and Velma are spotted and chased by the witchdoctor but escape into the jungle, where they find an airplane (complete with wire-activated skeleton) that has been carefully rigged up to look like a crash. They manage to reunite with Freddy and Daphne, who have meanwhile found oysters and pearls in one of the abandoned shacks. They spot the old man down in the lagoon, and there is an underwater chase that ends in a hidden cavern leading back to the village.Back in the village, the giant stone statue of Mano Tiki Tia comes to life and chases the gang from shack to shack. They escape, and Shaggy and Scooby even put a scare into the witchdoctor when they fall into and then emerge from the jungle. That gives Freddy the idea of trapping the witchdoctor: Using ghost drums, they'll lure him to a place where he'll see his reflection in a funhouse mirror, scaring him back down a path and into a covered pit. But the witchdoctor finds Shaggy and Scooby playing the drums. In the ensuing chase, Shaggy and Scooby wind up on top of the mobile statue, blinding it; it catches the witchdoctor and falls into the pit.
The witchdoctor is exposed as John Sims, who was trying to scare the villagers away from his pearl-poaching operation. The old man emerges from the brush: he is actually a young police lieutenant working undercover, and in gratitude for the help they've given him, he pays for one last party for the gang.