While Starfy and his family slept in the Pufftop Palace, a nearby land known as the Amy Kingdom was under attack.

The heart-shaped Monamool Stone held there was stolen by an evil female snake named Degil.

When Moe the clam saw Mattel and heard about her, he rushed toward Pufftop Palace, burst inside the front door, and told everyone that she would like to speak with them about the Amy Kingdom tragedy.

Later, after their relaxation, Starfy, Starly and Moe went with Mattel to stop Degil and restore peace to the Amy Kingdom.

The visuals are still 2-D, albeit with completely redrawn sprites, while the backgrounds are 3-D. Densetsu no Stafy 4 takes advantage of the dual screens, using them to show both the main game and map of the level simultaneously, while it uses the touchscreen to play the bonus stages, scroll the map, interact in the title screen and navigate menus.