Plot

A young witch and her grandmother work together to foil the plans of a wicked warlock's son before he can use powerful spells to create chaos in the world.

The Cromwell clan live in the real world, except for their grandmother who lives in Halloweentown, a place where monsters go to escape reality. But now the son of the Cromwells' old enemy Kalabar has a plan to use the grandmother's book to turn Halloweentown into a grey dreary version of the real world, while transforming the denizens of the real world into monsters. Only Marnie, a fledgling witch, can thwart the evil scheme.—<crow_steve@hotmail.com>

Marnie has just spent two years with her grandmother, Aggie. While hosting a Halloween party for their mortal neighbors, Marnie tries to impress a cute new boy named Kal by showing him Aggie's magically hidden room, which contains a spell book. Soon, Aggie begins to notice unwelcome magical symptoms. To investigate, she and Marnie travel to Halloweentown and must resolve the problem before the portal between Halloweentown and the mortal world, which only opens on Halloween, closes at midnight.

Upon arrival, they discover that the entire town has been transformed into a black-and-white world, and its inhabitants have turned into dull, discolored, and monotonous versions of themselves. Among the victims is Marnie's goblin friend, Luke. Aggie identifies this phenomenon as the "Grey Spell." She contacts her grandson, Dylan, back home for a spell from her spell book, only to find out that the book is missing. Marnie and Aggie soon realize that Kal is actually a warlock and the son of their enemy, Kalabar, from the previous film. Kal has stolen Aggie's spell book to limit her ability to thwart his attempt to carry out his father's revenge on both Halloweentown and the mortal world.

Aggie searches for a spare copy of her spell book at her house in Halloweentown, but it is also missing, leaving her in despair. During a conversation with Aggie, Marnie inadvertently reverts Luke back to his goblin form. Unable to explain the reversal of the spell, the group begins to think it is just temporary.

The trio then travels to the home of the universe's well-known junk collector, Gort, who acquires lost items from both realms. Gort has been affected by the Grey Spell and has sold most of his junk. The group becomes trapped in Gort's house, and Aggie begins to lose her color as well, sorting through missing socks with Gort. Marnie uses time travel to go back to Gort's house before the Grey Spell occurred. When Marnie and Luke arrive, they discover that Gort sold the spare spell book to Kalabar about fifty years ago. By recalling what Marnie had hastily said when Luke transformed back into his normal goblin form, they realize that the Grey Spell can be reversed by saying "Trapa," which is "Apart" spelled backward.

Meanwhile, Kal has expelled Halloweentown into a monochrome version of the mortal world and is now working to turn the mortal world into a monster movie parody of Halloweentown. Dylan and Sophie discover that Alex, who they thought was Kal's father, is actually a gloom created to distract their mother, Gwen, at a high-school Halloween party. Kal casts his spell, transforming the party guests into the monsters they are dressed as, resulting in chaos. Dylan and Sophie hide from the moisturized humans, including their mother.

Marnie manages to free Aggie, but they realize they are too late; the portal to the mortal world has closed, trapping them in Halloweentown. Refusing to accept that they are stuck, Marnie contacts her siblings, and together they develop a new spell designed to force the portal between Halloweentown and the mortal world to reopen permanently.

Kal angrily confronts Marnie, who mocks him and demands the spell book. Kal retaliates by conjuring slimy, living serpent vines of dark magic to take both spell books, attempting to prove his superiority. However, his plan fails when Marnie successfully takes the spell books from him. The vines send Kal away, and the family manages to break his spells in both the mortal world and Halloweentown.