Zeebo the Clown, a corrupt circus performer, steals money from the circus and tries to escape from the authorities by hiding in the funhouse. However, it catches fire, presumably because of Zeebo's love for cigars, and he dies. Years later, Weegee, his little sister Kathy, and his friend Josh come across the rebuilt funhouse called Laughing in the Dark and Weegee asks Josh if he had ever been inside to which Josh replies that he hasn't. Josh walks closer to the funhouse encountering a strange man who claims he runs the place wondering why Josh doesn't believe in Zeebo saying Zeebo is waiting for whoever goes into the funhouse mentioning "pick the right door and you'll go free. Pick the wrong door and there he'll be". Weegee and Kathy are too scared to go inside keeping their distance because they think it is haunted by the ghost of Zeebo based on what kids have seen and heard inside fueling the urban legend of Zeebo's ghost. But Josh doesn't believe it to be true scoffing at the possibility of a ghost clown haunting the funhouse. The strange man asks Josh if he's going to go through and Josh says that he might another time to which the man says he'll be there and that he's always there.
Weegee questions why Josh didn't go inside the funhouse if he doesn't believe in Zeebo claiming that Josh is just as scared of going inside as he and Kathy but not wanting to admit that he is afraid. Weegee subsequently dares Josh to go in and he accepts, deciding to prove that he went through by finding the clown dummy, which is modeled after Zeebo, and stealing its nose. So they go back to Playland in order for Josh to steal the nose to show he goes through as he says he is going to do. The strange man appears once again as Josh is nearing the entrance and he asks once more if Josh is going to go in and this time he replies that he is this time. Just before Josh goes inside, the strange man oddly states "it's the most fun in the park when you're laughing in the dark." He soon learns that the legend is indeed true when Zeebo comes back for revenge to regain his stolen nose.