Mr. Crocker is hypnotized into no longer believing in fairies. Unfortunately, it was his belief that powered Fairy World's magic. It's up to Timmy and his godparents to find a way to make Crocker believe again, or else Fairy World will lose magic and plummet out of the sky and fall into "Giant Bucket of Acid World"
Mr. Crocker is visiting his psychiatrist, Dr. Phyllis Fancyfree. He begs her to cure him of his obsession with fairies and she does by hypnotizing him into not believing in fairies, which has caused him to get a hunched back, his ear to slide down his neck, and loss of all charisma. Dr. Fancyfree tries to cover Crocker's mouth as he screams "FAIRY GOD PARENTS!" but is unable to hold him still and he spasms out, destroying her entire office. Dr. Fancyfree has had enough and decides it is time to take drastic measures. She takes out a gold pendant and hypnotizes Crocker with it into not believing in fairies anymore. The hunch of Mr. Crocker's back disappears, his ear slides back up to the proper position on his head, and he exclaims that he no longer believes in fairies.
Meanwhile Timmy is flying on a pink magic carpet (Wanda) and racing Poof who is riding a unicorn (Cosmo) through the streets. Wanda warns him that his wishes are getting a little conspicuous, but Timmy does not even know what the word means. At the same time as this, the cured Mr. Crocker is thrown out of Fancyfree's office and told never to come back. Mr. Crocker collides with Timmy and his fairies. Timmy tries to explain himself and the purple monkey flying a green unicorn, but Mr. Crocker pats him on his head and says that is alright, normally he would believe it was Fairy Godparents but he does not and clearly states what he sees as just what the fairies appear as. Mr. Crocker happily floats off while Timmy is left to ponder what happened. He sees the sign to the place Crocker was just thrown out, Dr. Fancyfree's Therapy to the Fairy Impaired. Timmy realizes that Mr. Crocker has been cured of his belief of fairies, and will no longer hunt them anymore. He happily exclaims "This rocks!"
Around this same time in Fairy World, at Fort Jorgen, Jorgen von Strangle is in a pink bathroom with facial cream and his hair in rollers, about to watch his favorite television show "Dancing With The Elves", when the power to his house goes out. Jorgen looks out the window and sees all of Fairy World powering down, The Big Wand is losing power, and everything is starting to lose color and turn black-and-white. Jorgen already knows who is responsible, he rips off his bathroom to reveal his normal clothes underneath, holds up his wand and declares "TO TURNER'S HOUSE!", but his wand goes flat and he has to take a bus. While Timmy and his fairies are throwing a celebration, Jorgen interrupts by creating his own door through Timmy's outside wall and tells them that they are using up all the magic in Fairy World. Timmy says that they were only celebrating Mr. Crocker not believing in fairies anymore. Jorgen looks shocked and says that is the worst possible news, and he will explain why with a colorful and elaborate magic demonstration. Unfortunately, his wand is out of magic, so Jorgen must scribble on paper with crayons instead.
Jorgen illustrates what is happening in Fairy World. Traditionally, fairies drew magic from the crazy people on Earth who believed in them. When Mr. Crocker started going crazy about fairies after losing his fairies, Fairy World was able to draw so much power from him alone that they simply used just him. So when Crocker stopped believing in fairies, Fairy World no longer had a source of magic, and unless Mr Crocker believes in fairies again Fairy World will lose all its power. Jorgen tells Timmy that the fate of Fairy World hangs in his balance, before hearing the Fairy World bus take off with out him. Jorgen runs out of Timmy's house and gives chase. At school, Timmy says that Mr. Crocker believes about fairies deep down inside, and will never change. Just then, Mr. Crocker struts up to the school wearing shades and stylish clothing. All of the woman at the school, including Crocker's usual enemy and ex-girlfriend, Principal Waxelplax, and even a few old ladies are immediately infatuated by the smooth new fairy-free Mr. Crocker. Timmy tells his fairies to do some magic to get his attention, but Cosmo, Wanda, and Poof have lost so much magic that they cannot even float anymore.
Timmy tries again by visiting Crocker's house while he was throwing a party. Timmy shows Crocker his fairies, suspended in the sky with ropes, but Crocker thinks that they are F--F- fancy-talking pinatas. While Cosmo and Wanda are beaten, Timmy and Poof decide the only way to get Crocker to believe again was to bring him to the magic. All Timmy needs is a few bus tokens to Fairy World and a burlap sack. Timmy kidnaps Crocker and throws him out of the Fairy World Bus. Timmy introduces Crocker to Fairy World, the most colorful, magical place on Earth. Unfortunately, the lack of magic has turned Fairy World into a run-down slum, which means it is not that magical. Jorgen runs over and warns them that the Big Wand is out of power, and Fairy World will fall from the sky. Crocker says that he has seen more magic at a bus stop in Toledo, calls Jorgen crazy and recommends him his psychiatrist. Timmy gets an idea, perhaps they can figure out how to uncure Mr. Crocker from his psychiatrist. Wanda puts Cosmo through a squeezing device and rung out enough magic from him to poof them all to Dr. Fancyfree's office.
Back at Dr. Fancyfree's office, she is listening to another one of her patients, the Mayor of Dimmsdale, talk about an earlier incident involving a goat meat convention and his pet goat/city mascot Chompy. Dr. Fancyfree tells the Mayor she can make Chompy forget all his transgressions with hypnosis, but to protect herself from lawsuit she has a "safe word" that is something that would never be said to the person being hypnotized, as it will set their mind free. Timmy says all they need to do is figure out Mr. Crocker's secret phrase, Cosmo says that he is on it and poofs them all back to Fairy World without them asking Dr. Fancyfree first. They must figure out the safe word for Crocker on their own, all the while Fairy World starts to plummet toward the place it was built above, Giant Bucket of Acid World, a place in hindsight Jorgen says was a poor spot to choose. Timmy, his fairies, and Jorgen try a number of things that no one would say to Crocker: Wanda says "You're a gorgeous hunk", Cosmo says "You've won the Nobel prize", Jorgen says "I think it's cool you live with your mom", and Poof says "Poof-poof poof-poof poof!" and so on but none of these work. Timmy then thinks harder and realizes he must say something he never would, "Mr. Crocker, you're the best teacher ever!".
Timmy's phrase releases the hypnosis on Crocker, whose hunch back returns, his ear descends to his neck, and he starts to spasm out again when he sees all the fairies around him, causing them to regain color whenever he points at them. This restores power to Fairy World just before it plunges into the acid. Wanda tells Jorgen that she's hoped he's learned a lesson, and that they cannot rely on just Mr. Crocker. Jorgen says that they will rely on all the nut jobs around the world to power Fairy World. A sequence of shots shows Mr. Crocker look-a-likes from different countries: France, Russia, and Spain; screaming "FAIRY GOD PARENTS!" in their respective languages. This fills The Big Wand's meter back up to full. Mr. Crocker is jumping around destroying stuff from his fairy spasms, so Jorgen snatches him by the neck and tells Timmy to get him out of here before he wrecks the place. Timmy says that they just need to make sure Mr. Crocker never stops believing in fairies again.
At Dr. Fancyfree's office, Mr. Crocker is strapped to the therapy chair with a mask on to prevent his spasms from destroying the office again. Dr. Fancyfree is about to tell him there is no such thing as fairies, when she sees Timmy, Cosmo, and Wanda flying outside her window. She screams "FAIRIES!" and starts to flip out just like Mr. Crocker did earlier, destroying her office while Mr. Crocker cheers her on.