After his house is destroyed in a fire on his very birthday, Donald Duck finds that he has inherited an "adventure cabana" in the nearby town of New Quackmore. Forced to share it with co-heirs José and Panchito, he discovers secrets about his great-grandfather.

The trio manage to calm the goddess down and she introduces herself as Xandra, the Goddess of Adventure. She initially mistakes Donald, José, and Panchito for The Three Caballeros but is disappointed to find that they are their lackluster descendants. When the trio tell her that they're looking for treasure, Xandra teleports them to Crete where they fight a Minotaur within the hidden labyrinth. Despite their differences, they manage to prove themselves to Xandra as the Caballeros's rightful heirs by finding three magical amulets left by their ancestors. Meanwhile, Baron Von Sheldgoose discovers a magical staff containing his evil ancestor Lord Felldrake.

With Sheldgoose to carry him around and his faithful minion Leopold for transportation, Felldrake begins his evil plans by traveling to Egypt. He intends to use the pyramids, which were actually giant rocketships built by space mummies, to travel to the Moon and take over the Egyptians' giant robot army stationed there. The Caballeros quickly give chase with Xandra's help and foil Felldrake for the first time.

The Caballeros head to Stonehenge, which is the secret portal to Goblin Town. Once inside, the new Goblin King Felldrake sentences them to Goblin Jail and then demands that the goblins go to war. When their weapons prove unsatisfactory, Felldrake unleashes an unstoppable war beast. The Caballeros must recover Xandra's book and escape Goblin Jail before the beast reaches the portal back to Earth.

The Caballeros are heading to Mexico after noticing Felldrake's activity there, but Donald has another date with Daisy and he can't be there in person. The nieces agree to help him by posing as Donald while he speaks to her from Mexico through a pair of magic mirrors, but this backfires and Daisy becomes even more furious. In Mexico, the natives revere and worship Panchito as a mighty warrior before throwing him into a ritualistic wrestling match against Sheldgoose. When the other Caballeros and Felldrake interfere with the match, the God of Death appears and kills them all as punishment for breaking the rules.

Daisy's patience with Donald has run out, so Xandra books them for a vacation in Shangri-La to help solve all their problems. The Yeti resort staff have orders to not let Donald leave until his temper has been dealt with once and for all, leaving him unable to help the other Caballeros as they begin a final assault on Sheldgoose's mansion to stop him from reviving Felldrake.

Donald arrives in time to join Xandra and the Caballeros and the four of them charge the basement of the mansion, while Felldrake gives Sheldgoose powers of his own to stall them while he reaches his full power. Sheldgoose's attempts to summon evil allies from their past adventures are countered by the Caballeros's own allies, and they arrive in time for Felldrake to awaken and destroy the Institute. The Caballeros try to fight Felldrake but are overpowered and pushed to the verge of defeat. In their last moment, they are contacted by Blazebeak, an ancient wizard whose power had been protecting them through their amulets. With his power, the Caballeros attempt to banish Felldrake back into his staff, but Sheldgoose destroys it out of panic and inadvertently restores everything to normal. His true nature exposed, the boardmembers strip Sheldgoose of his presidency and Donald is named the new Acting President to everybody's happiness. As Sheldgoose escapes on Leopold, he finds that Felldrake is now trapped inside his own body, and Felldrake decides to call in a favor from an "old friend"