The game's story centers around Guybrush Threepwood, a wannabe pirate who must lift a curse from his love Elaine Marley. As the story progresses, he must deal with a band of mysterious pirates and a French buccaneer, as well as his old archnemesis LeChuck.
The Voodoo Lady tells Guybrush that he must travel to Blood Island to find a certain uncursed diamond ring to break the spell. In doing so, he must get a crew, a ship, the statue of Elaine, and a map as nobody knows where Blood Island is anymore. In his attempts to get a crew, Guybrush hastily informs a captain named René Rottingham about the gold statue of Elaine, which piques his curiosity. The map also presents a problem as the only known map is tattooed to the back of Palido Domingo, who is tanning on an exclusive beach and does not cooperate in his quest. Guybrush must also find out where the statue of Elaine is hidden. After various competitions, Guybrush manages to do all of the errands, as well as gather a crew, consisting of Cutthroat Bill, Haggis McMutton, and Edward Van Helgen, to join him on a voyage to Blood Island.
While sailing to Blood Island, the crew is distracted by sightseeing whilst Captain Rottingham boards the ship and fights Guybrush in a game of insult swordfighting. Rottingham easily wins and takes the map to Blood Island. By fighting other pirates, Guybrush learns various insults and defeats Rottingham, reclaiming the map. However, a terrible storm results in Guybrush's ship crashing into Blood Island, the golden statue of Elaine being launched inland, and the crew deciding to mutiny; leaving Guybrush on his own again. On Blood Island, Guybrush meets Griswold Goodsoup and other locals, including the cannibals from Monkey Island. Guybrush then removes the cursed ring from Elaine's finger, gambles with smugglers to acquire an uncursed diamond, and returns Elaine to normal. The two share a moment together before LeChuck's skeletal army seizes them.
After a lengthy conversation with LeChuck, Guybrush is transformed into a child and left to roam the Big Whoop amusement park. Using a hangover cure discovered on Blood Island, he becomes an adult again and gets on the Rollercoaster of Death to confront LeChuck. In an unseen cinematic, Elaine reroutes the tracks, causing Guybrush to go through the same sections of the ride over and over, avoiding the lava. LeChuck chases Guybrush over and over, tormenting him with his fiery powers. Regardless, Guybrush manages to gather up various items to set off an avalanche, burying LeChuck under a mountain of ice. Some time later, Guybrush and Elaine are seen sailing off on a ship just married, as various friends he met on his adventures wave them goodbye.
During production, examples of major changes include enhancing the role of Murray, the talking skull. Originally intended only to be featured in the first chapter, he proved so popular with test players that he was written to re-appear at several points later in the game. The ending was somewhat cut short, and a storyboard has been circulating the Internet which explains the chain of events between the two final chapters; a scene which did not make it to the finished product due to time constraints.
The game was later re-released on a CD-ROM compilation of Monkey Island games, bundled with The Secret of Monkey Island and Monkey Island 2: LeChuck's Revenge. It leaves a gap in the series for Mac users since it was never released for that platform (the free software ScummVM interpreter supports The Curse of Monkey Island on the Macintosh, provided that the interested Mac user has the PC software).
After the game shipped, a Monkey Island film was in the works. This was only brought to light when Tony Stacchi, a concept artist for the project, sent his work to The Scumm Bar, a Monkey Island fansite. The film was cancelled in the early stages of development but Tony Stacchi published the artwork on his portfolio. Note that despite the name, this movie was not to be based on The Curse of Monkey Island, but rather on original material that was inspired by the entire Monkey Island series.
Though Adventure Gamers cited the graphic style's "refusal to take itself seriously" was adding "immensely to the game's charm", they found the secondary characters "criminally underdeveloped" and the ending "an anticlimax, leaving the player thinking he could have done so much more, if only the game’s programmers had let him". The abrupt ending of the game received criticism from GameSpot and Just Adventure. PC Zone described that due to the introduction of cartoon-ish graphics "for Monkey devotees of the first two titles something tiny and almost intangible has been lost", while still scoring the game a 92/100, praising the voice over work and humor of the game.