In the past, the Ancients used Mind Magic to create anything they could imagine. However, one of the Ancients, known as Brain, tried to use Mind Magic to brainwash all of Skylands, so the Ancients sealed him away along with the power of Mind Magic to prevent evil from using it.
Following the events of the last game, there has been an era of peace. However, a mysterious being steals a book from the Skylanders Academy and is revealed to work for Kaos, who seeks to use the power of Mind Magic to create an army of Doomlanders and conquer Skylands. To this end, he teams up with Brain, the last remaining Ancient, and they decide to brainwash Skylands, leaving only Spyro immune because he is a dragon. They are able to free Skylands and fight Kaos in a final battle, during which he transforms into a more powerful form and summons various Doomlanders to aid him. However, Brain betrays him and fights alongside the player. When Kaos is defeated, Brain tries to flee, but instead works alongside the Skylanders under the threat of being sealed away again and shrinks Kaos and Glumshanks.