Mr. Sunshine, a pink creature who owns a company operating flying industrial robots and acts as the game's antagonist, seeks to automate towns over the land by offering a universal basic income to all citizens of the towns who sign his contract – allowing him to take their "trash" (actually primary goods like corn, which the game world inhabitants grow full time) in exchange of what he calls "free money".

After an unnamed village's automation, Piku is awakened by a ghost in a nearby cave. As he comes out, he discovers he's actually been erroneously painted by the village's artist as a dark beast, and he is put in a cage by the frightened inhabitants. However, he is let free after it is discovered that he is virtually harmless.

Once Piku has earned the townsfolk's trust, he proceeds to explore the world, soon to be greeted by Mr. Sunshine himself on a flying robot. Along with three other people, he passively participates in a random extraction for a free tour of Mr. Sunshine's workplace. The raffle is won by one of the commoners in the crowd, a boy named Eli, who is taken to visit the magnate's secret volcano base.

Piku then travels through a swamp and reaches a forest, where he is tasked with defeating a dancing robot at a club. After witnessing an explosive attack against one of Mr. Sunshine's robots, Piku joins the Resistance, an environmental guerrilla trio of three forest villagers based in an abandoned underground metro station who intend to stop Mr. Sunshine's evil doings by destroying his robots with exploding pine cones. Piku and the Resistance march onto a lake separating the forest from the volcano base, but they discover that it has been dried out by Mr. Sunshine. They decide to reach the base by passing through a series of mines located below the surface.

A family of black worms welcomes Piku and the Resistance in the abandoned mining site. The mother, a giant worm, recounts how they have been suffering due to the lack of the lake's water, which once spilled from the pipes. Before helping Piku in any way, she asks him to rescue her child Ernie, who has become significantly overweight after drinking radioactive water from a pipe further underground. After finding Ernie and transporting him through the cave, Piku discovers the fate of an unknown civilization, who perished in a Pompeii-like eruption disaster; the creatures' shape resembles Mr. Sunshine's, but it is unknown whether he is a survivor of a natural catastrophe or if he killed his own kin with the volcano. Once Ernie is brought back to his mother, the worms assist him in destroying Mr. Sunshine's last robot in exchange for his support.

The final portion of the game takes place inside Mr. Sunshine's underground base, where he is plotting to destroy the surrounding land by covering it with lava in order to establish a new city with perfect inhabitants – although such beings are actually genetically degenerate creations with low intelligence, made by splicing the genes of the townsfolk with the forest villagers; a half of a creature of said species met by Piku in the base's laboratory may or may not have once been Eli.

After leaving the laboratory, Piku reaches a pit over live magma where Mr. Sunshine tries to have him killed. Piku avoids Mr. Sunshine's robot's lasers until his robotic henchmen piloting it go on a strike after discovering they aren't equally paid. Suddenly, Ernie comes to the rescue by rolling into the pit and letting Piku use his body as a platform to jump out of it. Piku proceeds to chase Mr. Sunshine over the magma, avoiding pop corn launched from the latter's motorboat. Upon arriving at a dead end, Mr. Sunshine decides to press the button which will make the volcano erupt, but the lava is so unexpectedly powerful – Mr. Sunshine in fact states that he meant for the lava to cover the land, not erupt like a geyser – that they are both ejected into the atmosphere on a platform.

As Piku kicks him, Mr. Sunshine is sent into space. A supposedly all-knowing being (actually the ghost from the start of the game, now manifesting itself as a room with eyes) then rescues Piku through a magic hole, informing him of his mission's outcome before sending him safely back to the base. Piku leaves along with the other Resistance members, going back to sleep in his cave off-screen.

After the story's events, the player can still explore the slightly altered post-game world to achieve all trophies, completing whatever had been left behind during the main playthrough.