The penguins, the lemurs and Marlene race against the sewer rats to find the Lost Treasure of the Golden Squirrel.
After a century, the Rat King and his minions steal the key, but the penguins take it from them. In doing so it falls into King Julien's habitat. The penguins go and see Fred, talking of treasure, and Julien claims that because he touched the key for 26 seconds, he deserves a 50% share in any treasure. Together they go to Fred, and meet a creepy, old lady squirrel. The others assume her to be Fred's grandmother because she gives him a hug, but he denies it because his grandmother is at home sleeping. After confirming that the treasure is real treasure, the old lady squirrel tells them to find and destroy the treasure, which Julien does not relish.
Then they go to Marlene's habitat. The penguins, the lemurs, Marlene, and Fred, compete with the Rat King and his rats to find "The Lost Treasure of the Golden Squirrel".
The old lady squirrel warns that only the one with pure heart can see the truth and the curse of the treasure is dangerous.
- Maurice's desire is to have an army of Julien manservants.
- Marlene's desire is having a classic habitat and handsome male otters to play Spanish guitars for her.
- Kowalski's desire is to create a 4000lb cerebral cortex.
- Skipper's desire is to purchase hundreds of tanks, planes and rockets.
- Rico's desire is to have a robot lemur battle arena.
- Private's desire is to play with hundreds of baby ducks.
King Julien (and the viewers) can hardly wait to see what depraved desires his mind harbours, but is surprised to see that the treasure can buy him nothing more than what he already has - adoring servants, a vast kingdom and a throne. He suddenly realises that to survive the cursed room of treasure, they must throw all the treasure to the rats. With no treasure on their side they are light enough to rise to the surface.
After a long journey of who has a pure heart announced by the creepy squirrel, everyone was exhausted except Julien for he had saved them. In the end, Frankie gave Private a silk feather which he called the Feather of the Crystal Falcon, ordered them to guard it with their lives & then flew away. After what everyone has just been through, they run away as Skipper enthusiastically takes the mission.