After being humiliated yet again by Crash Bandicoot at the end of Crash Twinsanity, Cortex returns to his evil scheming in his dilapidated Iceberg Lair. He stumbles across a newspaper article regarding the closure of Ebeneezer Von Clutch's condemned racing arena. He hatches a sinister plan to challenge Crash to a seemingly friendly race competition... with plans of crushing the hapless bandicoot under the ruins of the hazardous racetrack! Will the evil doctor's plans be the end of our furry hero?

In Crash Tag Team Racing, players can clash their car with an opponent's mid-race to make a super-car equipped with a powerful turret gun. When clashed, players can either get behind the wheel and drive, or fire an onboard weapon. Each character has his or her own uniquely deadly 360˚ rotating turret. Players can continue the action out of the car where they can explore the entire world on foot and collect upgrades for their cars and unlock bonus tracks.

Von Clutch's MotorWorld, a perilous auto-racing theme park owned by the cyborg Ebenezer Von Clutch, faces closure due to the theft of its Power Gems, including the Black Heart Power Gem that keeps Von Clutch active. To recover them, Von Clutch announces a race across the park's five lands, with the winner gaining ownership of the park. Appearing at the park in the midst of a chaotic car chase are the Bandicoots Crash, Coco, and Crunch, along with their foes Doctor Neo Cortex, his niece Nina, and Doctor N. Gin. Both teams are summoned to Von Clutch's office, where he pleads for their help to recover the stolen Gems. Cortex is initially dismissive, but sees an opportunity to seize the park as a new evil base and agrees to race, plotting to sabotage the Bandicoots. Pasadena O'Possum, a loyal racer for Von Clutch, vows to outrace Cortex, while Willie Wumpa Cheeks, the park's peculiar mascot and producer of the beverage Wumpa Whip, offers cryptic riddles about the Gems' locations.

As Crash recovers the Power Gems, Cortex, frustrated by his team's struggles, suspects someone else is rigging the race, though he continues his own schemes to undermine the Bandicoots. Coco and Pasadena notice a pattern: each Gem's hiding spot is marked by Wumpa Whip. When Coco presents her deduction, the cornered Willie confesses to stealing the Gems, including the Black Heart Power Gem, intending to sabotage Von Clutch and seize control. He flees with the Black Heart Power Gem, prompting a chase to Astro Land, while Von Clutch finally runs out of power and shuts down. Crash thwarts Willie's escape by aborting the launch of his rocket, but before Willie can be made to surrender the Black Heart Power Gem, Cortex's team attacks in a spacecraft, liquefying Willie and preparing to eliminate the Bandicoots. Crash throws a chicken into the ship's rotor, causing it to malfunction, and Cortex vows revenge as he retreats. The Bandicoots are presented the park's deed but choose to return it to Von Clutch, though due to the loss of the Black Heart Power Gem, Pasadena laments that Von Clutch will remain deactivated. Crash accidentally finds the Black Heart Power Gem in Willie's nozzle nose while drinking from it. He revives Von Clutch, who grants the Bandicoots free lifetime passes to the park in gratitude.