Red arrives in Lavender Town in the middle of a rainstorm and is looking for somewhere dry to stay. He tries to ask people for help, but they completely ignore him. While wandering around, he comes across an old man, Mr. Fuji, at a tombstone. Red asks what he is doing; he explains he is paying his respects to his deceased Doduo. Red also pays his respects. Mr. Fuji appreciates Red's kindness and asks him to go to his house.
At Mr. Fuji's house, the old man explains the origin of the Pokémon Tower: a cemetery built to respect the souls of Pokémon. Red wonders why Mr. Fuji's Doduo was not buried in the Tower; Mr. Fuji tells him that there are ghosts in the Tower, and as a result no one dares to go there anymore. Red refuses to believe that there are ghosts, but Mr. Fuji states that the ghosts have made the townsfolk frightful and untrustworthy, in the same way Red was treated. While Mr. Fuji explains, Red is looking through old pictures of Mr. Fuji and his Doduo and stumbles upon one that has Blue in it. Mr. Fuji informs Red that Blue went into the Tower about two weeks ago and never returned — these days, no one that enters the Tower ever returns. Intrigued by the mystery, and unwilling to back down from a challenge his rival took on, Red runs into the building.
Inside the Pokémon Tower, Red is taken by surprise by an eerie fog that begins to mysteriously form. A Psyduck suddenly appears from the mist, soon followed by other Pokémon, and as Psyduck draws near Red discovers that Psyduck is really a ghost. The other ghosts, along with Psyduck, prepare to close in on Red. Saur is quickly sent out, and after a few unsuccessful attacks it manages to crush the decomposing Psyduck corpse with Vine Whip. As the other undead Pokémon close in on the duo, Red and his Bulbasaur make a dash for the exit, but Red notices that the ghosts aren't following them. Noticing that the ghosts are not leaving the fog, Red deduces that the corpses must be controlled by the fog, just as he sees a blast of fire coming at him. Dodging the attack, Red recognizes Blue's silhouette, but as he tries to run over to them Blue's Charmeleon continues to attack. When he gets a closer look, he sees that there is something different about Blue's expression, as the latter stands alongside the ghosts in the fog.