The Genie gets stuck inside his lamp and needs sackboy to get him out. Prince Funubis needs to start an oil well on his float.
On Clock Hans' float the player helps to fix the clock on the lower deck of the float. The Director needs a photo with them, Leading Lady and Big Ron. Once in Brazil, the player walks throughout other creators floats and helps them with getting them working. Once the movies are tested, they are both hits and the director comes to the carnival. The director has the player act as a stunt-man in his movies: LittleBugPlanet and The Sewn Identity. The player does so and Clock Hans gives permission to use his teleportation device, and the player ends up in Tinsel Town, which is based on Hollywood. He promises to go to the carnival if the player finds his children when they are lost while he repairs the roof. The player travels to the Alpine Mountains where Clock Hans meets them when part of the roof is destroyed. Once they have that accomplished, the prince wants to go to the carnival. It is returned to the owner after the player wins in a game of "Monkey Swing." The Genie helps them travel to Golden Sands (located in Arabia) on a magic carpet where a prince is building an amusement park and needs the player to build and test its safety features. The player travels through the realm to retrieve it. The monkey thief king steals the Genie lamp from its owner. The player travels to the Genie's realm, The Bazaar, set in Persia. The Emperor decides to go to the carnival. The player retrieves it and gives it to the dragon with the Emperor's apologies.
The player goes to The Orient in China and meets the Emperor, who has a dragon's egg in his treasure room. It is revealed that there is to be a massive carnival in Brazil, and the player needs to go around the world to find the various creator curators and get them to go to the carnival. The player climbs to the Cave of Dreams where they meet the Mystic. The player starts in Down Under, a theme based on Australia, where they meet Bruce, a helpful character who gets the player started in the game. Sackboy, the main character, decides to take a holiday walkabout around the world. The game's story is a sequel to the original PlayStation 3 version. These levels can be uploaded to the game's online servers to be shared among the community.
Players can create their own levels from a blank slate or template using various items gained in the game and items ready-made by the game's developers. The game's overall goal is to capture prize bubbles which include stickers, costumes, materials, and objects players may use to customize their own Sackboy and levels. The game also features user-generated content similar to the PlayStation 3 original. The main objective of each level is to move from one side of the stage to the other, dodging deadly contraptions such as electric snakes shooting out and trying to kill your sackperson. Players must traverse complicated mazes during levels using devices including switches, rotating platforms and floating lanterns that can be ridden or grabbed. Though most of these levels look similar to their PlayStation 3 counterpart they are, in fact, new redesigned levels. These levels were created by SCE Studio Cambridge, and are based around seven different themes that draw inspiration from real-world locations including Chinese gardens, dry Australian deserts and icy Alpine stages. The game consists of an introduction, 23 main levels, and 14 mini levels, 2 of which are "Mini Games".
The PlayStation 3 version has three 'thick' layers and four 'thin' layers, however LittleBigPlanet PSP only has two 'thick' layers and three 'thin' layers. The game's gameplay is the same as the original PlayStation 3 version, albeit without the co-operative multiplayer aspect and one of the 'layers' in which the level 'set' is created within.