This novel tells the subsequent story of the Baudelaire orphans, who discover the crew of the Queequeg submarine searching for a mysterious sugar bowl in the eponymous grotto.

Having been separated from Quigley Quagmire by the waterfall of the Mortmain Mountains, the Baudelaire children arrive at the hull of the Queequeg, a submarine piloted by Captain Widdershins.

They correctly guess the password, "the world is quiet here", and enter the porthole to meet Widdershins along with his stepdaughter Fiona and the chef Cookie, who they recognise as the optimist Phil that used to work for the Lucky Smells Lumbermill (in "The Miserable Mill").

Klaus examines the tidal charts to estimate that the sugar bowl is in the Gorgonian Grotto, but is interrupted by sonar detection of an octopus-shaped submarine that they suspect is captained by Count Olaf.

As the grotto is conical, the Queequeg reaches a point where it is too wide to pass through, and instead the Baudelaire children and Fiona venture further in diving outfits.

Sunny cooks a meal with ingredients on the beach, saving the wasabi for their return, as the others discover instructions for communicating with Verse Fluctuation Declaration, in which a message is hidden in a poem that has some of its words replaced.

The children reach Briny Beach to find Mr. Poe—just as they did on the day they learned of their parents' death—but they leave him behind to enter a taxi with Kit Snicket at the wheel.