Lloyd is ambushed in the Ninjago City Museum by Morro, a ghost who escaped the Cursed Realm and ends up getting possessed. Morro steals the Allied Armor, which lets him summon other ghosts from the Cursed Realm and goes to Sensei Wu's tea shop to get the staff that was given to him by the First Spinjitzu Master. Without Lloyd powering them, the other Ninjas lose their elemental powers and have no choice but to escape with Wu on Destiny's Bounty, with Morro in pursuit, riding Lloyd's elemental dragon. Wu reveals that Morro was his first student and the Master of Wind.
Morro boards Destiny's Bounty and tries to get Sensei Wu's staff, but Wu throws it overboard. Morro goes after the staff while the ship crashes. The Ninjas learn that the staff had three engravings on it: clues to locating the tomb of the First Spinjitzu Master. The first clue is the Scroll of Airjitsu, which is in the possession of a thief named Ronin. They travel to Ronin's home in Stiix, a city built on water, but are intercepted by one of Morro's ghost allies. The Ninja defeat the ghost, discovering that their weakness is water. Wu reveals that Kai and Nya's mother Maya was the Master of Water, just as their father Ray was the Master of Fire, and that Nya has the potential to succeed her.
The Ninjas try to purchase the Scroll Of Airjitzu from Ronin, but the price is too high, and they fail to earn money for it. Morro ends up taking the scroll with the help of his ally, Soul Archer, whom Ronin is indebted to and uses the scroll to learn Airjitzu. Ronin instead gives the Ninja weapons that can kill ghosts. Meanwhile, Sensei Wu trains Nya to control water and discovers that her weakness is fear of being weak and helpless.
Nya and Ronin go to the Samurai X cave where they encounter Morro and his ghosts who are after Nya's samurai Mech. Nya accepts that she is the Master of Water and conjures rain in the desert to keep the pursuing ghosts at bay. Meanwhile, the Ninjas seek to learn Airjitzu by other means and travel to the haunted temple of Sensei Yang. Their fears are tested by Yang's ghost but they eventually recover a second Scroll Of Airjitzu. While trying to escape before the sunrise catches them in the temple, Cole drops the scroll and goes back to retrieve it. Failing to get out in time, the temple's curse turns Cole into a ghost.
The Ninja must travel to the Cloud Kingdom to recover the Sword of Sanctuary, the second clue on Wu's staff. To get there, they must climb the tallest mountain in Ninjago and use airjitsu to jump into a cyclone above. While climbing, they're caught in an avalanche, but Cole's new ghost powers allow them to escape. They successfully use Airjitzu to reach the Cloud Kingdom before Morro. Back at the Bounty, Sensei Wu and Nya capture one of Morro's allies, Ghoultar, and begin to interrogate him.
The Ninja search for the Sword of Sanctuary in the Cloud Kingdom, but are betrayed by Fenwick, one of the Kingdom's high-ranking inhabitants, who struck a deal with Morro. Morro obtains the sword and returns to Ninjago with the Ninja in pursuit. Kai takes the Sword from Morro as Lloyd temporarily regains control of his body, and the Ninja fly off on board the Bounty, planning their next move.
Ronin steals the Sword of Sanctuary and gives it to Morro to pay off his debt to Soul Archer. Morro takes possession of Ronin to trick the Ninja into traveling to his own resting place in the Caves of Despair, where he intends to bury them alive. The Ninja escape and Ronin tries to repay them by entrusting them with the real location of the tomb, which is under the ocean.
The Ninjas reach the underwater tomb with Ronin's vehicle and manage to pass two trials, before encountering Morro. Morro is trapped and the Ninjas find the Realm Crystal in the tomb of the First Spinjitzu Master. Morro demands the Realm Crystal in exchange for Lloyd. Kai tricks him, but when the Ninjas rush off to save Lloyd, Morro manages to obtain the Realm Crystal, which he uses to open a portal to the Cursed Realm and escape.
The Ninjas go to Stiix to stop Morro from unleashing his master, the Preeminent, who is the embodiment of the Cursed Realm. They manage to fend off many ghosts, while Lloyd reaches Morro. Morro tries to tempt Lloyd with the promise of releasing his father from the Cursed Realm. Lloyd hesitates, giving time for the Preeminent to be unleashed, while he himself is banished.
In the Cursed Realm, Lloyd meets his father, who helps him escape, and he fights Morro across multiple realms, including a realm called "Chima". The Ninjas try to stop the preeminent, but it proves to be too powerful. The ghost army is also infinite since any ghost they kill just reemerges from the Cursed Realm through the Preeminent. The Ninjas evacuate Stiix, while Nya unlocks her true potential and drowning the Preeminent. Wu tries to save Morro, but the ghost chooses to drown instead and passes on to the departed realm with the other ghosts. Using the Realm Crystal, the Ninjas bring back Lloyd, who follows in his father's footsteps and becomes a master.