In an island world called Vulcan Island, a trio of crabs, consisting of Elder Shelton the Wise Old Crab and two of his minions are gathering around a ritual at Summoner's Rock to summon 'The Arch Warriors' to defeat their ancient enemy, the Mawgu. However, the Mawgu breaks the circle of summoning, scattering the heroes across the island. SpongeBob Squarepants and Tai Kamiya end up right where Elder Shelton and his minions are. He tells them that he has summoned them here and tells them that the Mawgu has escaped from his prison and is seeking vengeance against the island. The Mawgu has created a terrible ooze corrupting everything and everyone that it touches. However, according to the crabs' legends, the Arch Warriors can rescue everyone from the Mawgu Ooze.
SpongeBob and Tai fight the Mawgu's minions, finding Sakura Kinomoto and Matt Ishida. After wandering around the island, Elder Shelton shows them their "home away from home". While searching for materials to build a camp for them, Tai finds Sora Takenouchi after she takes out two sand monsters, while SpongeBob and Sakura find Yugi Muto trapped underground, and dig him out. They later find Nathan Adams and Tomoyo Daidouji with a battalion of exiled crabs. After rescuing them, Nate reveals that he had a communicator to contact Izzy Izumi, but the battery isn't inside. Searching around the island for a battery, the heroes find the Crab Clan's main village being attacked by a huge sand monster. Defeating it, the heroes and Elder Shelton find the battery required for the communicator.
Contacting Izzy, the heroes discover that Izzy had been noticing strange reading lately. Izzy also reveals that the Mawgu had created a rift in time and space above the island's volcano which is siphoning energy from Odaiba, Bikini Bottom, Tomoeda, Springdale, and Domino City, to power himself; if this continues for too long, it will suck up their worlds and destroy the multiverse.
Using Izzy's blueprints, the heroes search the island to collect parts for a Rift Zipper, to seal the rift and stop the Mawgu. During their search, they find Syaoran Li fighting some of the Mawgu's much stronger minions, unknowingly stumbling upon one of the components for the Rift Zipper. After helping Syaoran defeat the monsters, the heroes acquire the component. Returning to their camp, the fully-formed group of heroes are approached by Elder Shelton, who tells them the Insect Clan, including their leader, Queen Orbit, has been captured and enslaved by the Flower Clan, who have been infected by the Mawgu's ooze, turning them into vicious monsters. After rescuing Queen Orbit, they acquire the second component. Queen Orbit, hearing about their plan to stop the Mawgu, explains that third component is with King Rod, the Flower Clan's leader, who's also infected, but they must complete a mission to save the Flower Clan and acquire the third component: King Rod has built a barricade that prevents the river flowing through the other villages, forcing them to only drink the Mawgu's ooze. So, to save the river and the other villages, the heroes distract King Rod long enough for Queen Orbit's Commando Bugs to destroy the barricade, causing the river the flow once again, and cure all of the Flower Clan, including King Rod. After reuniting with Elder Shelton and Queen Orbit, King Rod gives the third component to the heroes.
Once the Rift Zipper is completed, the heroes enter the volcano and travel up into the rift, where the Mawgu awaits them. Syaoran, Sora, Tomoyo, and Nate keep the Mawgu busy while SpongeBob, Tai, Sakura, and Yugi ascend, through using the debris sucked in from the other worlds to the rift's core, with Matt staying in one spot to handle the Rift Zipper. After a hectic battle, Matt uses the Rift Zipper to drain the Mawgu of his strength, allowing the closing rift to seal him away forever.
After being congratulated by Elder Shelton and the denizens of Vulcan Island, the heroes then depart through a portal open by Izzy, so he can send them back to their respective worlds.
In the post-credits scene, the stranger (from Movies 1 and 2.5) calls Grouper that he has "set the last location for the scheme". Grouper, excited over the news, replies that "the others are set as well", revealing that the stranger and Grouper are part of a team.
