Ilo and Milo are two friends that meet daily for companionship inside a bizarre park in a strange world, populated by odd characters including other safkas, utilitarian lifeforms known as "cubes", and the haughty but helpful Sebastian, a small man wearing a bicorne and riding a flying beetle.

Each time Ilo and Milo leave for the night and return to each other in the day, the park becomes more and more complicated to navigate (in a reference to the game's levels and puzzle elements). After one meeting, Ilo and Milo become upset at the thought of leaving each other again, crying so heavily that the subsequent levels are played underwater. Later they each have an idea to draw maps for each other and hurl them about the park in hopes the other finds them, ironically making the park even more confusing to navigate. In the final chapter, Ilo and Milo resolve not to go home at nighttime, and instead search for the sun so that they may stay together. Becoming lost once again, they finally reunite at a vehicle that resembles a locomotive fused with an biplane, and depart from the park in it. Vowing never to separate again, they wander the world together.

The main story is allegorical for a brief subplot involving two human characters named "Ilona Zevon" and "Milton Foley"; the player receives snippets of the subplot (in the form of written letters) after collecting enough "Memory Fragments" found in the levels. In this subplot, Ilona and Milton write letters to each other frequently and desire to meet together at their favorite spots, including an unknown park and lake. Ilona eventually stops meeting with Milton and writing altogether; Milton persists in sending mail, only to have it returned from a "Dr. Jacob", who claims that Ilona no longer resides at the intended residence. Ilona is later revealed to have been barred from seeing Milton by "they". Milton reestablishes contact with Ilona and resumes their meetings, and Ilona acquires two tickets for an unknown night train, asking they "never turn back". The final snippet is a missing persons report for Ilona and Milton, dated November 29.

A second subplot, a fable called "The Huntsman and the Fox", is narrated to the player by Sebastian, if he/she encounters him in specific bonus levels. The fable involves a fox, a huntsman, and his demanding fiancé. The fiancé asks the huntsman to kill a fox and create from it a beautiful fur boa. The huntsman goes into the forest and encounters the fox, however, the fox convinces the huntsman to spare it for the sake of its family. The fiancé is furious and threatens to leave the huntsman if he does not produce a boa, and the huntsman confronts the fox again. The fox strikes a deal with the huntsman, offering its tail in exchange for its life and the vow of the huntsman to never again harm a fox. The fiancé however rejects the tail alone as too inadequate to make a beautiful boa with, and the huntsman decides to break his deal with the fox. The fox warns the huntsman that if he is killed, the huntsman will never be able to leave the forest, as it is the only guide in or out; as the master of the forest, the huntsman is disbelieving and kills the fox. However, the fox proves correct, and the huntsman soon becomes hopelessly lost. After much wandering, the hunstman encounters an abandoned house and enters it, only to be sealed inside by an unknown force forever. The fiancé is left pining for the huntsman, eventually forgetting about the boa but never of him. Sebastian later suggests that the huntsman eventually became the new forest guide. It's possible that the huntsman was actually Sebastian himself.