A muscle man and a midget are riding on a tandem bicycle when it suddenly breaks apart and nearly injures them both. The gang happens by in the Mystery Machine and witnesses this strange scene. The mismatched pair tell the gang they're from the circus and blame the broken bicycle on a ghost clown. The gang visits the circus and hears more about the ghost clown from the ringmaster, who believes in this otherworldly creature. Real or not, the clown has frightened away all the talent; and the circus will have to close. The gang investigates this mystery, but the evil clown finds three of them, each alone at different times. He hypnotizes Scooby into thinking he's a high-wire artist, Daphne into believing she's a unicyclist and Shaggy into imagining that he's a lion tamer. Fred has a scheme to trap the ghost, but his plan fails. Scooby and Shaggy are the ones who get the laugh laugh on this sinister clown.