On Sonic's world, there is an enormous lake called Never Lake, which is known for being where the mystical Little Planet, a small planet of both beauty and wonder, appears above for one month once a year. Also known as the "Miracle Planet", Little Planet is known for being the home of the Time Stones, seven mystical gemstones that can freely control time, which allows them to turn a desert into a jungle, clean lakes into polluted ones, and other time-crossing wonders.
Not long after Little Planet makes its annual appearance at Never Lake, Dr. Robotnik takes notice of the Time Stones. Intending to build a fortress on the planet and use the Time Stones for his goal of global domination, Robotnik goes to Never Lake to seize Little Planet for himself. To make sure that Little Planet does not leave, the doctor chains it to a nearby mountain with his face sculpted on it, before covering Little Planet in a metallic shell as he constructs his fortress, all while scouring the planet for the Time Stones. Meanwhile, Robotnik uses the unique temporal passages on Little Planet to invade the past of the planet, where he fills it with robot transporters and Metal Sonic holograms in order to turn its future into one where he has total control. This affects Little Planet's fate severely, to the point where it becomes a ruined land in Robotnik's future.
Eventually, Sonic the Hedgehog races the doctor way across fields, over lakes and through forests to get to Never Lake and see Little Planet for himself, not knowing about Robotnik's actions. Upon receiving the report that Sonic is approaching, Dr. Robotnik's eyes light up and a fearless smile appears on his face. Assured that he will be able to finally crush Sonic once and for all with his scientific prowess, Robotnik excitedly proclaims, with a blue flash of light that lurks behind him, that he will seize the Time Stones and finally conquer the world.
Meanwhile, Sonic arrives at Never Lake. To his surprise however, he finds Little Planet in its sad and chained state following Robotnik's takeover. Seeing the planet chained to the nearby mountain, he suspects that the doctor is behind it all, and travels to Little Planet via the chain keeping it tied to his world. Ending up in Palmtree Panic, Sonic learns that he needs to destroy the robot teleporters in the past and secure the Time Stones before Robotnik. As he continues his adventure however, he meets Amy Rose, a female hedgehog, who has come to Little Planet after predicting a "destined" encounter with Sonic on the small world with her tarot cards. Upon seeing Sonic, Amy instantly falls in love with him and tries to hug him. Not reciprocating Amy's advances, Sonic tries to continue with his adventure.
After encountering Robotnik and forcing him to retreat by defeating his EGG-HVC-001, Sonic continues onward to Collision Chaos, with Amy following him. Upon arriving there however, Amy is kidnapped by Robotnik's latest and greatest creation to date: Metal Sonic, a lethal robot built in Sonic's image. The robot proceeds to leave with Amy despite Sonic's attempts to save her. Now having to save both Little Planet and Amy, Sonic continues onward across Little Planet, overcoming and defeating Robotnik and his contraptions along the way.
Eventually, Sonic arrives in Stardust Speedway. There, he finds Robotnik and Metal Sonic, who challenge him to a deadly race, with Robotnik keeping a laser active behind them as they race forward. In the end though, Sonic defeats Metal Sonic, who gets smashed after he crashes into a gate closing in front of him, which forces Robotnik to retreat. Afterward, Sonic frees Amy, who hugs him as thanks.
After saving Amy, Sonic travels to Metallic Madness. Inside this stronghold, he eventually encounters Robotnik using the Egg Spinner in an attempt to defeat Sonic. However, the machine is destroyed, triggering a chain reaction that causes Little Planet's metallic shell to crumble and forces Sonic to escape from Little Planet with Amy. Landing near Never Lake, Sonic leaves Amy in a safe place and runs away, before noticing the shell covering Little Planet break apart. After that, the ending of the game will depend on the player's actions:
- If the player has not managed to secure a good future for all the Rounds in the game, Robotnik will retreat on his hovercraft with a blue Time Stone in the palm of his hand while laughing at Sonic. Noticing the doctor, Sonic will throw a rock at him, hitting his vehicle and causing it to explode. A post-credits scene will show Little Planet re-appearing above Never Lake in its poor state once more. The text "TRY AGAIN" will also be shown.
- If the player has managed to secure a good future for all the Rounds in the game, Sonic will look at Little Planet, which will be shaking for a moment before disappearing and leaving behind some sparks in the shape of Sonic's face. After the credits roll, some Little Planet flowers will appear around Never Lake with the text "YOU'RE TOO COOL!" appearing.
