Link and Tetra travel the Great Sea aboard Tetra's ship to find new land, when they encounter the Ghost Ship. Tetra enters it and is heard screaming. Link fails to come to her help and falls into the ocean. Washed ashore on Mercay Island, Link meets Ciela and her grandfather Oshus, and both agree to help him rescue Tetra. Link enlists Captain Linebeck, who reluctantly agrees at the condition of a treasure. The group sails the Great Sea and learns the Ghost Ship can be found by collecting the three Spirits of Power, Wisdom, and Courage. After freeing the Spirit of Power, Link obtains the Phantom Hourglass, which helps him explore the Temple of the Ocean King and find the remaining Spirits.

While rescuing the Spirit of Courage, the group notices a similarity to Ciela. Oshus arrives and reveals Ciela suffers amnesia after being attacked by Bellum, a Demon Monster who consumed life and Oshus, as the Ocean King, banished him in his Temple's slums; Bellum then created the Ghost Ship to trap his preys. With the three Spirits rescued, Link locates the Ghost Ship and rescues Tetra, only to find her lifeless and petrified. the Ocean King then task Link to craft the "Phantom Sword", the ultimate weapon capable of defeating Bellum and rescue Tetra. Sailing the sea, Link finds the pure metals and, fused with the Phantom Hourglass, gains the Phantom Sword.

In the Temple's slums, Link defeats Bellum and is teleported out to Linebeck's ship, where Tetra is freed. When Link and Tetra are about to hold hands, Bellum arrives and take Tetra away to the Ghost Ship, and apparently kill the Ocean King. While confronting him, Link is knocked unconscious, and Linebeck injures Bellum. However, Bellum possesses Linebeck, becoming the Phantom Knight and Link is forced to fight him in the Ghost Ship destroyed. Link kills Bellum to free Linebeck and rescues Tetra. The Phantom Hourglass's sand then whisk away in the sea. the Ocean King, having survived, reveals his true form as a white whale and leaves with the spirits. Link and Tetra are teleported away to the Great Sea, but not seeing Linebeck, when Tetra's crew insists their adventure was only a ten minutes long dream. Link is then confused when he notices the Phantom Hourglass in his hands, and see Linebeck's ship afar.