Panorama Cotton is a pseudo-3D scrolling shooter reminiscent of Space Harrier, set in an anime-style fantasy world. Various levels scroll "into the screen", vertically, horizontally, or diagonally. It is widely considered one of the best technical showcase of the Sega Mega Drive.

Silk's sister Knit comes to tell her that Queen Velvet has started saying things that don't make any sense. Later, the Queen reveals that she believes that the world is falling into chaos, and that she is the only one who can save it. She rides off on an animal called "Pinky" to save the day, and disappears before anyone can stop her. Perplexed, Silk and Knit deduce that a burnt Willow which recently turned up in the castle garden is responsible for the Queen's odd behavior. Apparently, monsters north of the kingdom have been burning any Willow they see. Before doing anything else, Silk immediately decides that she needs to get rid of the burnt Willow in the castle first. Silk carries the burnt Willow far away, but before she can dispose of it, Cotton appears suddenly and snatches it from her. Not pausing for a moment to hear Silk's story, Cotton begins to eat the burnt Willow. However, she quickly spits it out, angry and disgusted. When Cotton discovers that someone is burning Willows, she vows that she won't let it continue. From there, Silk and Cotton set off on their new adventure.