Princess Daisy was kidnapped by the Boos lead by King Boo, so Luigi, Mario, Toad, and Yoshi step up to rescue her and do some ghostbusting, or should we say "boo-busting"?
Luigi is cleaning the house cheerfully. He looks at a letter from Daisy, asking him to stop spying on her. Daisy writes that she will come to his house if Luigi leaves her alone. Luigi then asks Mario to take out the garbage, but he refuses and breaks his own neck before falling asleep.
Luigi looks out the window to see Old Man Hobo, Waluigi, Enzo, and a Boo with a propeller hat running amok. He becomes frightened but nonetheless decides to take the trash out himself. He is further startled by a crack of thunder. Luigi makes a mad dash for the trash can and runs back to the front door. He then break-dances before proceeding to go back inside. However, the door is locked. Luigi rattles the knob to no avail, and his brother is still asleep. A Boo appears behind Luigi and scares him just as Daisy arrives. Luigi punches the princess and throws her at the ghost, which traps her inside.
Mario wakes up as Luigi jumps back into the house through a closed window. The green-clad plumber sketches a plan, to rescue Daisy by vacuuming the Boo holding her hostage with his Poltergust 3000. He asks Mario, Toad, and Yoshi for their help and to their disapproval explains the specifics of his plan.
Despite their disapproval, Mario, Yoshi, and Toad agree to help Luigi save Daisy. The four wore their ghostbusting attire, and Luigi begins driving their van. Mario uses their Boo-tracking iPad to play "Angry Birds" and Luigi becomes angry and distracted, and he crashes the van into a house, where Crazy Raisin Lady was screaming as Mario sucks her inside. Yoshi sees the Boo carrying Daisy, so the four begin to chase it. Mario runs into a wall the Boo phases through. Yoshi attempts to eat it but it dodges and he attaches his tongue to a taxicab instead. Toad chases the Boo into the house to see Bowser marrying Bowsur. Luigi ambushes the Boo. It spawns a Warp Pipe, which Luigi desperately holds open for his teammates before jumping in himself.
The ghost-busters land in Big Boo's Haunt. King Boo has Daisy trapped on the roof. The heroes line up as King Boo lets Mr. Wuggle loose from a doghouse, spooking Luigi. Mario is unfazed by Mr. Wuggle. They enter through the back door and come across a Boo dance party. Luigi cannot stop himself from dancing, which alarmed King Boo and his guards. Luigi incapacitates one with a Magic Rock and his Poltergust, while the other Boos flies off in fear. Mario wants the group to split up, but his brother refuses.
King Boo enters a room and stomps the bridge of falling blocks. Mario tells Luigi that he just needs to believe to get across, bringing the Believe Fairy to life. The Believe Fairy brings out his pingas to help them cross, but Mario ground-pounds it and tears off the pingas, causing them to fall to the basement and making the Believe Fairy scream in pain.
Meanwhile, Toad and Yoshi have found the door to the roof, but there are swarms of Boos outside that they can't vacuum. Yoshi has an idea, and he opens the door, gets on the floor, and walks the dinosaur. King Boo appears, announcing that the exit to the roof is hidden. Yoshi keeps dancing, and one of the Boos spazzes out and crashes into the bookcase behind him. The bookcase blows up and reveals the exit. However, Daisy is not on the roof. In her place is Mr. Wuggle, wearing her clothes. King Boo gloats and powers up Mr. Wuggle to a ridiculous size.
In the basement, Luigi has lost hope, but Mario sings "Don't Stop Believin'". The Believe Fairy appears again, but this time, he refuses to help since Mario broke his pingas off. Mario tells Luigi that there's only one way out as he eats a Poison Mushroom and dies. Luigi mourns his death before Mario emerges from his body in ghost form. Mario phases through the mansion with Luigi before seeing the humongous Mr. Wuggle.
Toad and Yoshi decide to help. Yoshi resumes dancing on Mr. Wuggle's head, while Toad kicks Mr. Wuggle in the buttocks. Mario tells Luigi that he is their only hope. He then abruptly stops, sending Luigi flying into Mr. Wuggle's crotch. Mr. Wuggle keels over dead and crushes King Boo. Everyone celebrates. Luigi then tells Daisy that it is time for the date, only for the screen to switch over to show that Mr. Wuggle killed Daisy after he died. Luigi is rendered speechless in shock. Mario suggests they all get burgers, much to Toad and Yoshi's delight.