One step inside this spooky castle and you'll know something weird is going on! You'll have to be careful here because some of the nasties that float around here can't be beat by just inhaling them. The not so famous twins Lololo and Lalala rule this castle of gloom.”
— Instruction manual description • Kirby's Dream Land
Kirby is standing near the castle's moat when he suddenly sneezes causing some nearby stars to fall out of the sky and land in the water. He sneezes again, but this time a star clonks him on the head and he loses his balance falling into the moat.
Castle Lololo is a haunted stronghold filled with spooky enemies such as Two Face, Booler, Flapper, Mumbies, Broom Hatter and Hurly. It is surrounded on all sides by the tropical waters of Float Islands. It features a lot of big rooms with different paths and has a maze-like room with multiple doors leading to other locations in the same room. Halfway through the level, Kirby grabs a Warp Star and crashes through the wall to another area of the castle where Lololo is faced by himself. After that battle Kirby continues through a few more rooms before Lololo and Lalala are fought together.
In Spring Breeze the level is removed, but Lololo and Lalala is still faced as they replace Kaboola as the boss of Float Islands. It is likely that Castle Lololo appears briefly though, as Kirby flies to a small island with a castle after defeating Mr. Frosty in Float Islands. The facts that the player battles Lololo and Lalala in this area and the fact that the castle is surrounded by water makes it more likely to be true. The level's intro is also remembered by replacing the original intro of the following level, Bubbly Clouds.