Mario is asleep in his bed when a paper airplane suddenly flies in through his window and hits his nose. Waking up, Mario sees that it's a note saying that Bowser has kidnapped Princess Peach and is holding her captive near the Koopa Troopas' headquarters. Mario promptly makes his way to World 1-1 of Subcon and is ambushed by the two Shyguys at the start of the level. Although he is able to take out one of them with a Vegetable, the other Shyguy trounces him, booting him out of the level and back into his bed.
Mario dismisses the previous occurrence as just a dream and goes back to sleep, but then another paper airplane hits his nose. This time, it says that the Princess is being held in a Piranha Bin. Mario makes his way back to World 1-1, but he is again beaten by the Shyguys at the start of the level and lands back in his bed, where he again is awoken by the appearance of a note from Bowser hitting his nose. This time, the note says that Peach is being forced to sit through a Shyguy fashion show. Mario returns again to World 1-1, saying he's "taking the kid gloves off," but again the Shyguys manage to defeat him ("I wish Luigi were here. I could blame him!"). He then returns to World 1-1 after receiving another note that says Bowser is reading the congressional record to Peach. This time, he actually manages to make it to the waterfall in the middle of the level, only to end up falling over said waterfall and landing back in his now-suddenly-flooded bedroom. Then he receives a note saying that the Princess is now being forced to listen to two Fryguys debating about the names of "the little things on the end of your shoelaces". He is shown going back to World 1-1 three times only to keep getting beaten by the Shyguys, some of whom are sitting at a table having coffee and donuts.
The story then cuts to Toad being awoken from his sleep by Princess Peach calling him on the phone to invite him to her party today. Toad tells her that he just had the strangest dream, in which Mario was dreaming that he couldn't get past World 1-1. Toad goes on and on about his dream until Peach hangs up. Toad starts making himself a pot of coffee and then notices he should probably get some fresh water for it. He goes out to the nearby waterfall but is suddenly ambushed and beaten up by some nearby Shyguys. The story then ends on this scene starting over again with Toad waking up to a phone call from Peach.