Mermaid Man & Barnacle Boy are entering the Krusty Krab, most likely for lunch, and upon realizing this, SpongeBob goes into an excited frenzy, bursting through a steel wall in order to get their autograph. The heroes run away from him, accidentally leaving Mermaid Man's utility belt inside. SpongeBob finds it, and tries to give it back, but they drive away in the Invisible Boat Mobile before he can do so. SpongeBob decides to wear the belt and play with it, thinking that he could hold on to it until after work. He discovers the "Small Ray," and starts shrinking the items in the kitchen. However, Squidward enters the room after getting disrupted by SpongeBob using the belt to shrink everything in the kitchen and sees SpongeBob serving tiny Krabby Patties to cockroaches and asks SpongeBob why is everything in the kitchen so tiny. Squidward discovers that SpongeBob has Mermaid Man's belt. Assuming that SpongeBob has stolen the belt, he plans to do the right thing and call Mermaid Man in order to get revenge, and tell on him. SpongeBob realizes that if Squidward tells on him, Mermaid Man will find out and he will be kicked out of his fan club for sure. In order to stop Squidward, SpongeBob shrinks him, and promises to find a way to return him to normal after Squidward demands SpongeBob to return him to normal size. He tries to use the different buttons to make Squidward big, but none of them work. Not wanting Mermaid Man to find out due to how he might react, he leaves to find someone that can help him.
SpongeBob goes to Patrick for help, and Patrick mistakes Squidward for a "Squidward Action Figure" and starts playing with him, even after realizing that it is the real Squidward. Patrick then suggests to turn the "M" upside down, setting the belt to W for "Wumbo." SpongeBob questions the validity of this, but after Patrick responds by stating the many uses of "Wumbo," SpongeBob is convinced by this idea and decides to test it out, but then he accidentally shrinks Patrick. Seconds later, citizens start coming and greeting to SpongeBob, making him shrink them so that they can't tell Mermaid Man. Eventually, SpongeBob has shrunken everyone (including his mother) in Bikini Bottom, and stuffs them into a jar. He then realizes that he has shrunken Mermaid Man and Barnacle Boy as well, and he apologizes and Mermaid Man goes into a long story to show he understands until he denizens of Bikini Bottom shout "JUST TELL HIM HOW TO UNSHRINK US!" in order to return to normal size. Mermaid Man asks him if he has tried setting it to Wumbo which is enough to make everyone, including Squidward realize that he does not know how to unshrink them either. The people except for Mermaid Man and Barnacle Boy and Patrick form a mob and get out of the jar. They go inside of SpongeBob's body and beat him up. This continues for a while until eventually everyone says that everything is too big. This gives SpongeBob the idea to shrink Bikini Bottom itself, which satisfies the people, who see no discernible difference from their previous lives in living in a miniature Bikini Bottom. Finally, SpongeBob shrinks himself, and the tiny city begins celebrating. The closing scene shows Plankton getting off a bus, returning to Bikini Bottom from a vacation. He is surprised to see that he is now taller than Bikini Bottom.
In some airings, the scene where SpongeBob attempts to turn Squidward back to normal size by testing the various buttons on the belt is edited. The scene where Squidward is cut in half with scissors is edited out on occasion, as well as him choking and gurgling off-screen. Also on certain airings during the scene where SpongeBob zaps people in Bikini Bottom when they say Hi to him the flashes are cut out to possibly prevent seizures.
In Indonesia, this episode is usually completely skipped, either due to ads or possibly because it is controversial.
This is the first episode where Mermaid Man's belt is purple with a blue M instead of a yellow M.
This is the second episode where SpongeBob is wearing a belt covering his shirt and tie through most of the episode. The first was "Hall Monitor."
One of the people who get shrunken say "What's up, Sponge?" This is a reference to Bugs Bunny's famous quote, "Eh, what's up, Doc?"
When SpongeBob shrinks himself, Mermaid Man's belt is changed into his normal pants.
When SpongeBob first shrinks Squidward and Patrick, they are comparable in size to action figures (roughly 6-8 inches). When he shrinks the rest of the townspeople, they are about the size of jellybeans. When he shrinks the whole town and then himself, Plankton is taller than the tallest building, and taller than SpongeBob was before he shrunk, despite he should in realistic proportions, be the same size as everyone else.
When SpongeBob shrinks Patrick, he has the emblem on the belt set to "Wumbo," but afterwards, it is turned right side-up again.
After Mermaid Man used the invisible boat alarm, and said "There she is," he was just holding his pants, but when he got to the boat, he was wearing clips on his pants, which he wasn't seen putting on.
Part of the invisible boat where Barnacle Boy lands painfully is a gearstick, but then he sits on the seat without moving sideways.
SpongeBob can't get the citizens of Bikini Bottom back to normal, but in "Mermaid Man and Barnacle Boy" SpongeBob mentioned a ray gun that made things grow six times their normal size. It's excusable that SpongeBob was so scared that he forgot about it.
In some shots of when the townspeople are beating up SpongeBob's inside, SpongeBob has bones. However, SpongeBob is an invertebrate.
When everyone popped out of SpongeBob, Sandy's head was missing.
When SpongeBob shrunk Sandy, Squidward and Patrick's eyes were black.
The aforementioned clips holding up Mermaid Man's pants changed colors between shots.
SpongeBob has difficulty closing the jar with everyone trying to fit in it, but when Mermaid Man mentions setting the belt to wumbo and everyone yells "What?!," it appears that they don't quite fill up the jar, and he has plenty more room. This also happens when he cries "You don't understand!"
When SpongeBob gave the Krabby Patty to the cockroach, the holes on the spatula disappear.
Even though there were a lot of cars parked outside the Krusty Krab, there were no customers inside the Krusty Krab except for Mermaid Man and Barnacle Boy.
When Mermaid Man and Barnacle Boy drove off from the Krusty Krab, all the cars were gone.
When Squidward called for Mermaid Man, he only got to say, "Mer", so it is unknown how the person knew to give him Mermaid Man.