Headdy, the central protagonist of the game, arrives in North Town to find that the evil puppet King Dark Demon is in the midst of attacking the puppet town to select which of the peaceful toys should live and which should be converted into his evil minions. Headdy is captured and rejected by Dark Demon's forces, and is dropped into the dust cargo to be thrown into the incinerator. However, Headdy escapes the clutches of Dark Demon's minions and sets off to defeat the evil king.
However, trouble is afoot. Not only is the puppet world filled with Dark Demon's minions, but to reach the evil overlord's castle, Headdy must defeat Dark Demon's Keymasters who serve as the king's elite guard. To make matters worse, Headdy is followed by Trouble Bruin, a puppet jealous of Headdy's success. Trouble Bruin wants to be the star instead of Headdy, and will stop at nothing to get rid of him.