To avoid Mr. Krupp's tasks, George buys a 3-D Hypno-Ring (which they receive after 4-6 weeks of back-breaking labor) so they can get Mr. Krupp to hand over the incriminating video. Harold replaces it with one of his little sister Heidi's sing along videos. They then begin fooling around. George hypnotizes Mr. Krupp to act as if he were the Amazing Captain Underpants, who is the hero of their homemade comic books. To their distress, Mr. Krupp, as Captain Underpants, takes the role seriously and departs to fight crime.
Captain Underpants confronts two bank robbers, and orders them to "Surrender! Or I will have to resort to Wedgie Power!" The bank robbers fall down in hysterics and are apprehended by the police. The police begin to arrest Captain Underpants too, but George and Harold whisk him to safety on their skateboards.
Then the three witness two robots stealing a large crystal. Captain Underpants tries to stop them, but his cape gets caught on their van. Captain Underpants, with George and Harold clinging to him, is dragged to an old, abandoned warehouse.
There they meet the evil Dr. Diaper, who plans to use the crystal as part of his Laser-Matic 2000 to blow up the Moon, destroying every major city on earth, so that he can take over the planet. George and Harold escape and hide, but Captain Underpants is captured and tied up.
George uses a slingshot to toss fake doggy doo-doo between Dr. Diaper's feet. Dr. Diaper is terribly embarrassed, thinking that he has had an "accident". When he departs to change his diaper, George and Harold incapacitate the robots and untie Captain Underpants. They pull the self-destruct lever on the Laser-Matic 2000.
Dr. Diaper, enraged at the destruction of the Laser-Matic 2000, his robots, and the foiling of his plan to take over the world, aims his Diaper-Matic 2000 ray gun at George, Harold, and Captain Underpants.
Captain Underpants shoots a pair of underwear at Dr. Diaper. The underwear covers Dr. Diaper's face, which renders him incapable of defending himself. Before the building exploded, the boys ask the Captain, "Where did you get that other pair of underwear?" The reply was, "What other pair?" while Captain Underpants wore a barrel over himself. After the warehouse exploded, Dr. Diaper was sent to the police station.
George, Harold, and Capt. Underpants return to Mr. Krupp's office. The boys try to figure out how to return Mr. Krupp to his normal self, but they've lost the instruction manual for the 3-D Hypno-Ring. In desperation, George tries dumping water on Mr. Krupp's head. It works, and Mr. Krupp returns to his angry self, resolving to give the video to the football team after all. As it turns out, the team enjoys the Sing-A-Long video so much that they change their name from the Knuckleheads to the Purple Dragon Sing-A-Long Friends. From this point on, whenever anyone snaps their fingers, Mr. Krupp transforms into Captain Underpants.
And another thing, after Krupp is "watered," the ring instructions are found in a shirt pocket. After being thrown away, you can read, "Whatever you do, don't pour water on anybody's head when they are in a trance! This will cause the hypnotized person to slip back and forth from trance to reality whenever they hear they hear the sound of fingers snapping." Despite this, the boys were able to de-hypnotize their teacher through the ring.
Meanwhile, at a nearby school, the cafeteria gives the children the "Stinky Taco Surprise" , so the children throw it away. The wasted food comes to life as the Inedible Hunk, which causes chaos in the school. Captain Underpants decides to rapidly shoot underwear at the monster, but it doesn't work. So the Captain heads to the toilets, where the monster is fooled by him when it drinks out of the toilet. Captain Underpants flushes the Inedible Hunk down to the sewers, and the comic ends.
On the back of the comic, there is a notice reading, "Don't miss our next adventure: Captain Underpants and the Attack of the Talking Toilets, Coming soon to a playground near you".