Patchy the Pirate, SpongeBob's number one fan, sits on the stage after the audience has taken their seats. He reveals he has traveled from Encino, California to catch the musical. Two security guards tell Patchy to leave, as the show is about to begin. Patchy objects, but gets kicked out as Patchy claims he is a victim of pirate discrimination and sings a protest chant. One of the guards apologizes, then tells the audience to enjoy the show.
SpongeBob SquarePants awakens and welcomes the day with his pet snail, Gary ("Bikini Bottom Day"). He greets various friends in his hometown of Bikini Bottom— including his best friend Patrick, his neighbor Squidward, and his friend Sandy Cheeks — as he walks to the Krusty Krab restaurant. At work, his boss Mr. Krabs tells his daughter Pearl that she will manage the restaurant one day. With Pearl uninterested, SpongeBob hints his desire of being the manager. Mr. Krabs laughs at the idea, telling SpongeBob he is "just a simple sponge"("Bikini Bottom Day Reprise 1"). Then, a violent tremor suddenly rocks the entire town.
A news report reveals that the tremor was caused by a nearby volcano (Mount Humongous) that will erupt ("No Control"). SpongeBob cheers up an upset Patrick by reiterating that they are best friends forever ("BFF"). With the town in a panic over the impending doom, married villains Plankton and Karen try to convince the citizens to enter an escape pod that ensures safety. But, the two have a secret scheme planned as they will hypnotize the citizens in the pod into liking the chum that they serve at their restaurant, the Chum Bucket ("When the Going Gets Tough"). The townspeople, unknowingly, support this idea and decide to hold a last-minute music concert to raise money. Squidward's idea of his one-man show is immediately shut down. Instead, Pearl suggests that the famous rock band, the Electric Skates, play at the concert. Everyone agrees and Squidward is named manager of the event.
SpongeBob, however, is against the idea of leaving town and believes the citizens should save Bikini Bottom. SpongeBob thinks back on Mr. Krabs' words from earlier and wonders if he could save the town ("Just a Simple Sponge"). He goes to Patrick and Sandy for help. Mr. Krabs sees the upcoming disaster as a money-making opportunity, holding an "apocalypse sale". Pearl worries about her father's greed, believing that it overshadows his care for her ("Daddy Knows Best").
Meanwhile, SpongeBob convinces Patrick and Sandy to team up, climb the volcano, and stop it from erupting with an invention Sandy will build. The friends are determined to succeed ("Hero Is My Middle Name"). Before they start their plan, a group of cultist sardines appear. They found wisdom in Patrick's thoughts at the town meeting and decide to make him their new leader ("Super Star Sea Savior"). Patrick likes the idea and decides to back out of SpongeBob's plan so that he can bask in self-glory, angering SpongeBob. The two fight and end their "BFF" status. After Patrick leaves, Sandy reminds SpongeBob that things are bound to be okay. The entire company reveals their personal thoughts and feelings about the impending disaster ("Tomorrow Is").
Patchy again sneaks onstage, telling the audience that pirates are persecuted by others because of stereotypes ("Poor Pirates"), supported in song by a group of pirates he discovered during the show's first act, wandering into a dive bar in nearby Hell's Kitchen. The theater's security again intervenes to chase Patchy away. SpongeBob wakes up and greets a new day: the day when the volcano is expected to erupt ("Bikini Bottom Day Reprise 2"). Bikini Bottom has fallen into anarchy and chaos: the mayor has employed a dictatorship over the people and an angry mob has started to hunt down Sandy, thinking her science is the cause for the volcano's impending eruption. Sandy hides from the mob and shows SpongeBob her invention, the Eruptor Interrupter. They plan to throw it inside the volcano and save the town.
Back in Bikini Bottom, Plankton worries Sandy and Spongebob will successfully climb up the mountain and save the town, but Karen tells him that she found his avalanche maker. She says they can use it to create an avalanche that Spongebob and Sandy won’t survive. The Electric Skates finally arrive ("Bikini Bottom Boogie"). Squidward asks if he can perform with them as an opening act. The band will only allow it if Squidward buys every item on a long shopping list. Meanwhile, SpongeBob and Sandy make their way up the volcano with great difficulty. Sandy tries to lift their spirits by reminding them of what they have learned in karate class about never giving up ("Chop to the Top"). SpongeBob cannot help but think of how he misses Patrick and wishes he was there to help them. In Bikini Bottom, Patrick finds life as a guru unexciting and misses SpongeBob as well, prompting him to leave his followers behind to help SpongeBob ("(I Guess) I Miss You").
Squidward obtains all but one of the items on the Electric Skates' list, so the band refuses to let him perform despite his pleas, calling him a "loser" in the process. Their use of this word causes Squidward—constantly called a loser in childhood to snap back at the band in anger; The band quits. Now alone, Squidward insists that he is not a loser and performs a song with a tap dance number and back-up chorus in his imagination ("I'm Not a Loser"). Back on the mountain, Plankton and Karen use the avalanche maker to make the avalanche. SpongeBob starts to fall when Patrick saves him with the jetpack Sandy invented. The two reaffirm their friendship and follow Sandy to the summit of the mountain. When they reach the top, neither Sandy nor Patrick are able to reach the rim where they need to throw the device in. They turn to SpongeBob, who doubts his skills ("Just a Simple Sponge Reprise"). They remind him that he is the only one who can squeeze through tight areas and that his optimism has gotten them this far. With new determination, SpongeBob throws the Eruptor Interrupter in. They head back to Bikini Bottom and see if their plan worked.
Due to the band being gone, there will be no concert or escape pod, which causes anarchy. SpongeBob tries to calm everyone down, insisting that whatever happens, they have each other ("Best Day Ever"). When the time comes for the volcano to erupt, everyone braces for their deaths. The time passes without an eruption, signaling that the Eruptor Interrupter has worked. With Bikini Bottom safe, everyone decides that they should celebrate by having a new concert with Pearl and Squidward being the leads. Patchy descends from above on a rope, having finally managed to sneak into the show, making the cast reluctantly agree to let him be a part of the finale as the townspeople welcome the brand new day ("Bikini Bottom Day Reprise 3").
During the curtain call, the cast performs one last song.("SpongeBob Squarepants Theme Song")