The house that old man Nebbercracker owns is alive and is swallowing whole anything that comes close to it. Three neighborhood kids DJ, Chowder, and Jenny decided to plan an attack on the house on Hallows' Eve. There plans go array when police officers catch them attempting to break into the house and place the kids in the back of a police car. However, the house swallows the police officers and then swallows the police car holding the children. Now that the children are in the belly of the beast, they have to find a way to put a stop to this monster house.

In Monster House players have to explore the house while taking on the role of the three children (the game will automatically switch to a different character as the story calls for it). Each child is armed with a water blaster and a melee attack to take out enemies. The water blasters reservoir will get drained each time it's fired and will require an occasional re-pumping to refill it. Also, each child has a unique limited ammo weapon, DJ has an instant camera which can stun enemies with its flash, Jenny has a slingshot which shoots marbles, and Chowder has water balloons to soak enemies. Players can find items like keys to unlock doors, cans of pop to regain health, and arcade tokens which can then be used to play a mini-game called Thou Art Dead, a side-scolling action game. The various bathrooms found through out the house are safe zones and will allow the player to save their game. Also, finding toy monkeys scattered through out the house will unlock game art which can be viewed in the game's Gallery mode.