Mickey falls asleep with a book of fairy tales in his lap and later wakes up in a strange village. A girl resembling Daisy Duck asks for his help: the village’s magic crystal has been stolen by an evil Phantom, and the village’s happiness has turned into sorrow. Mickey decides to help and sets out for the North Mountains to find the Princess, who knows how to reach the Phantom’s Castle in the Clouds.

Land of Illusion is a platform game where Mickey moves left and right, ducks, and jumps. In the air, he can perform a bounce attack to defeat enemies, and some areas require bouncing on foes to reach them. Mickey can collect and throw items, swim, use doors, ladders, and vines. Along the way, he acquires special items like a rope for climbing walls or a potion that allows access to hidden areas. Mickey starts with 2 Power Gauge points; collecting stars gives him extra lives.