The game begins with a surreal sequence, wherein an unknown party asks the player: "What do you remember about that day?" The player is given several dialogue choices that build a cohesive description of "that day", though at this time, the player is not aware of the event's importance. Before the game begins, the player is asked to draw an image depicting this mysterious scene, introducing them to the game's core drawing mechanics.
Following this is an animation sequence wherein one of the characters from the previous game, Heather, recovers from a nightmare. She is shown to possess a red-colored jewel pendant. In the same sequence, Heather is abducted by a darkness which emanated from a scepter she discovered in a beached treasure chest in the middle of the night. The next morning, when the other characters realize she's missing, a search for her is cut short by Wilfre, who causes the majority of the Raposa villagers to vanish, reveals himself as Heather's captor, and ultimately drains the Village of color. The remaining characters flee to the back of a massive turtle delivered, upon request, by the Creator.
Their numbers reduced and their home ruined, the game follows the Raposa's struggle to reunite with their fellows and, with the aid of the Creator's Hero of Creation, defeat Wilfre before he can realize his as-yet unknown goals. The remaining members of the Village travel to Watersong, Lavasteam, the Galactic Jungle, and Wilfre's Wasteland. During the last level of Wilfre's Wasteland, Wilfre kills the Hero and starts absorbing color from it, supposedly destroying it. The villagers from the Turtle Ship, Watersong, Lavasteam, and Galactic Jungle all pray for the Hero to revive. The Hero revives but Wilfre returns with the creation that Mari built. The Hero defeats Wilfre, who vanishes, leaving Heather behind.
The Hero returns with Heather, who is now without her "dark side". At the word of Mari, the Creator puts out the Eternal Flame. All the Raposa disappear, with the exception of the non-Raposa Mike. The screen turns black to white. The same description of "that night" is displayed. Heather prays for her little brother: "God, just bring back my little brother to me". During the ending credits, a series of still photos of the events of "that night" are shown, which depict Heather, Mike, and their parents going home from a carnival, and eventually being involved in a car crash (although the fates of the parents are left ambiguous as to whether or not they survive, the sequel Drawn to Life: Two Realms, confirms that they died). Heather sustains minor injuries, and her brother Mike goes into a coma. Heather prays that her brother is to wake up. Later, Mike wakes up from his coma, and Heather hugs him out of joy. The final photo shows doll versions of Jowee and Mari that were won at the carnival.
An alternate ending is present in the Drawn to Life Collection (possibly due to the original being considered "too dark"). It depicts Heather and Mike catching fireflies while on a camping trip with their parents. During this, Mike climbs a tree and falls, knocking him unconscious. Heather holds his body and cries for help, resulting in her parents running over. Heather and her mother pray for Mike, and he regains consciousness soon after. It ends with the same shot of the Mari and Jowee dolls as the first ending.