The short starts with SpongeBob and Mr. Krabs at the Krusty Krab that is decorated for Halloween. Mr. Krabs gives SpongeBob a garbage bag filled with moldy sponges and tells him to take this bag out to the dumpster. On the way out, SpongeBob trips on a bucket. He and all of the moldy sponges were flying.
As SpongeBob was going to get out of the sponges, he saw the green moldy full moon. Because he was on the moldy sponges, he turned into Moldy Sponge for the rest of the short (which made him green and grow big eyebrows and mushrooms). Seeing that he turned evil, he laughed until he sees Mr. Krabs coming out of the Krusty Krab.
Mr. Krabs complains that he told SpongeBob to throw away the moldy sponges and that he has to do it himself. He takes SpongeBob, and carries him into the dumpster, thinking that he is a moldy sponge. He groans about Mr. Krabs throwing him out, and the Halloween short ends.