The episode opens with Patchy the Pirate, who is stuck in traffic in his boat-car. He wants to get home in time for a new SpongeBob episode, as he tells Potty the Parrot over the phone. Patchy is honked at by drivers behind him, to which he yells back that he is only trying to talk to his parrot. When he arrives back home, Encino has suddenly disappeared. Only desert is still there. This reminds Patchy of an old SpongeBob story, which is also about a vanished city.
In the story, SpongeBob and Patrick are in Jellyfish Fields. Patrick wants to capture photos of SpongeBob's soap bubbles with a camera, but they pop after every snapshot. Patrick thinks it is probably the fault of the camera, but his friend SpongeBob tells him that it is the natural nature of all the bubbles that they burst after a short time. The two sing a song about the short lasting time of bubbles. SpongeBob tries to make a huge soap bubble, but it encloses him and Patrick and flies away. This leads them to a small cave behind the fields.
There they discover a part of a golden, hidden amulet. SpongeBob suggests bringing the amulet to the Bikini Bottom Museum. Over at the museum, Mr. Krabs is trying to scam customers out of money despite the museum being free this day. Once SB and Patrick arrive, the two meet with Squidward, who notes that the two have stumbled upon the missing half of the amulet of Atlantis. He tells that this amulet comes from the legendary city of Atlantis, where there are many treasures and sights, including the oldest existing soap bubble. Mr. Krabs and Sandy Cheeks walk over to see the amulet.
When Squidward joins the two halves of the amulet, a bus appears which can actually take the characters to Atlantis. But the bus does not want to move, so they push it to the nearest gas station. When it comes to the fact that the bus does not run on gasoline, but instead with singing, they all start singing a song which underlines their anticipation for Atlantis. Having then arrived in Atlantis, the friends are standing in front of a long staircase waiting for the King.
When he greets the guests, the king introduces himself as "Lord Royal Highness, LRH". Plankton, who was also secretly on the bus, would like to search for weapons in Atlantis, not knowing that Atlantis is a peaceful city with harmless weapons. He then finds said weapons in a large, unsupervised armory. When Lord Royal Highness guides the visitors through the hallways of Atlantis and talks about the origin and the like, Mr. Krabs becomes impatient as he finally wants to find gold.
His innate sense for money makes Krabs find a large space full of gold coins, in which he wants to stay. So the king moves with SpongeBob, Patrick, Sandy, and Squidward to a room where some high-tech equipment is found. LRH presents the four, among others, a device that produces ice cream from household. Another can reduce objects and persons down to the nano range. Since Sandy is very enthusiastic about these devices, she wants to test it again and remains alone in the room.
Next, Squidward, SpongeBob and Patrick visit a large room with many paintings, statues, and artifacts. In this room are paintings, into which one can "jump" in and can rest in it, very much to the joy of the art lover Squidward. He, as Mr. Krabs and Sandy before him, also remains back alone. SpongeBob and Patrick want to go to the oldest existing bubble and the King leads them to a small space where they can see the little bubble. More than ever fascinated by the sight, they look at their favorite object, while the king opens himself to the preparation of the evening meal. Patrick suggests shooting a picture of the bubble, but this unexpectedly bursts. At dinner, Mr. Krabs, Sandy, and Squidward tell the King of their opinions about Atlantis, when SpongeBob and Patrick show up and nervously say that they must quickly go back to Bikini Bottom, since the bubble had popped. When the king tells them the truth that this was just a prop for the tourists and shows them the real bubble, Patrick takes a picture again, which also bursts the real bubble. The king then becomes very angry and calls the Atlantean guard to arrest the guests.
All of the characters are on the run when Plankton suddenly appears with a large tank and says he wants to take over Atlantis. When he presses the start button to start firing, however, only ice cream comes out. The King of Atlantis is fascinated by Plankton and says that he will display this small creature as a substitute for the bubble as a thing of interest. All but SpongeBob are sad that they have to leave Atlantis again and make their way home, while LRH takes the amulet and discards it so that no visitors can ever go to Atlantis again. SpongeBob is happy but the others want to go back to Atlantis.
Meanwhile, Patchy is still looking for Encino, which he then finds. However, the city is greatly diminished; it is the size of a snowglobe. Suddenly an alien family appears. The mother apologizes to Patchy and confesses to him that her son was playing with a shrink ray and thus shrunk the city. They bring the city back to normal size. Patchy is happy, only then to be crushed by Potty's huge foot.