In Scooby-Doo: Phantom of the Knight, Scooby, Shaggy, and the rest of the gang have an encounter with a fireball while driving near an old castle. They decide to investigate the old castle which turns out to be a tourist attraction named Joust For Fun. Once there, they meet Jane McHaggis, the proprietor of the establishment, who explains that the castle is being haunted by the Black Knight. The Black Knight is believed to be the spirit of the original owner of the castle and has kidnapped the actress playing the castle's princess.
The gang takes up the cause of solving this groovy mystery on a pro bono basis, as is their wont. The player guides the gang through the castle grounds while interacting with random objects, solving puzzles, and hunting for clues. Along the way, the gang meets more characters who offer their own clues but also become suspects in the mystery. By the end of the game, the player must make a determination of who is behind the Black Knight.