The Tale of Laughing in the Dark is the 2nd episode of Are You Afraid of the Dark? Betty Ann introduces her story before titling it The Tale of Laughng in the Dark.
A teenager, Josh, is hanging out with his best friend Weegee and his little sister Kathy at an amusement park called Playland. They arrive at Laughing in the Dark, its spook house supposedly haunted by a clown ghost named Zeebo, but they don't go in. The next day, they do research on the place and discover the place's background: The original Laughing in the Dark was run by a circus. One of the clowns, a smoker named Zeebo, stole the circus's payroll of $4,000 and hid in Laughing in the Dark. Unfortunately, he accidentally started a fire in the spookhouse with his cigars and was burned to death. A new Laughing in the Dark was built, with a Zeebo dummy at the end, and it is nearly an urban legend that Zeebo still haunts that place. Josh calls Kathy and Weegee chickens, saying they believe in Zeebo's ghost and are too scared to enter Laughing in the Dark. In anger, Weegee dares Josh to enter Laughing in the Dark alone. Josh says yes, and that he will take Zeebo's nose to mean that he made it to the end. If Josh wins the bet, Weegee will have to wear Zeebo's nose to school for a week.
Josh enters the spookhouse and steals Zeebo's nose, and as agreed, Weegee has to wear it. The next day, after being teased by Josh, Weegee throws it into some bushes. Josh goes to retrieve it and smells cigars. He finds nothing, gets the nose, and leaves (the audience, however, sees some cigar smoke coming from behind Josh's house after he departs).
That night, Josh comes home and discovers that his parents have left a note that implies that they are at the thea- ter and have left food. Josh nukes the spaghetti and gets some pudding from the fridge, but drops it when he hears a noise, and finds nothing. After answering a call from Weegee, Josh gets another one in which a scratchy voice says to "give it back." Josh, thinking it is a prank from Weegee, goes into the kitchen to find the container of spaghetti full of cigars and a footprint with a "Z" in the spilled pudding. Terrified, Josh runs up to his room and calls Weegee, inquiring whether or not he prank-called him. Their call is interrupted by the strange voice, who still says to "give it back", or else he'll come upstairs to take it, revealing that Zeebo's ghost is after Josh. Josh locks his door and escapes through his window after seeing a balloon that says, "GIVE IT BACK!" pop.
Josh returns to Laughing in the Dark, enters, and returns Zeebo's nose, along with a box of cigars as a peace offering. At the end of the story, the carney of Laughing in the Dark says his signature "It's the most fun in the park when you're Laughing in the Dark!" and smokes a cigar, proving that he may have been Zeebo's ghost all along.
At the end of the story, Kristen (who was revealed to be scared of clowns) defiantly tells the others that she can withstand her fear, only to get scared and run off when Eric chases her with a clown mask. As the credits begin, the rest of the group runs after the two.
- This is The first story that we hear Betty Ann tell, it's also the first appearance of Zeebo.
- One of 5 episodes to use a different opening theme.