The episode begins with the camera zooming to the inside of one of the machines in the Underground Pool, which has timer and date screens, the timer showing "23:59", while the date shows "10-30-17". The date and time then change to "00:00" and "10-31-17," making it Halloween on Club Penguin. The scene then cuts to the Plaza, where it's shown that the island starts glitching out and traces of a Halloween party flicker in and out of reality. Inside the Puffle Hotel, Lil Jeffy, the Agent, and the Floppy Green Penguin are sleeping, when the lobby starts glitching out as well, causing the bell on the counter to ring uncontrollably. This wakes up the three penguins, with the Agent being especially alarmed by the noise. Lil Jeffy then grabs the ringer and throws it out the door, and the Agent thanks him by saying he did "great work."
The ringer winds up falling into the manhole leading to the Underground Pool, where it sinks to the bottom of the flooded room and lands on one of the computers the Agent had been using before he flooded the Underground Pool in a fit of PTSD. This caused the computer to activate and malfunction, sending an electrical discharge all throughout the pool. The electricity attracted all the dead penguin bodies that were floating together, causing them to fuse together and return from the dead as the unholy abomination known as the Hybrid Sea Monster.
Meanwhile, in what appears to be the Wilderness, a blue penguin and a black penguin are warming up a fireplace. Suddenly, some digging noises sound off nearby; the blue penguin hears them and asks the black one if he heard them as well. The blue penguin thinks someone's out there, so she heads out to check. She soon finds a green penguin who's slumped over. She thinks he doesn't look well, so she gets closer to check on him. The blue penguin then placed a hand on his shoulder and finds that he's really cold. She turns to ask her friend if she should bring this mysterious green penguin over to the fire, but notices that he's wrapped his arm around hers. Surprised and annoyed, she tells him to let go, but he simply looks up at her, revealing that he has no eyes. The blue penguin screams at the sight of his face, then both of them are dragged down to the Underground Pool where it's revealed that the green penguin is actually the "hand" of the Hybrid Sea Monster. The blue penguin screams even louder at the sight of the Monster, which promptly eats her and groans in satisfaction. The episode ends with a jumpscare with one of the Monster's hands slowly rising up, drooped over, then revealing its face and lunging at the screen.
- Halloween is the first episode in which the usual narrator doesn't speak. The second one is The Fall, and the third is Halloween 2.
- Halloween is the first episode of Club Penguin Shutdown that doesn't use Near Human Intelligence's outro.