Traverse Town is the most important world in the game. It's where the item and accessory shops are located, and also the Gummi Ship's location. Here, you meet Donald and Goofy, who end up helping you throughout the duration of the game and becoming main party members. Traverse Town is split into three districts, the first district being the only safe one at the moment, the others inhabited by endless swarms of Heartless.
A cutscene is shown featuring Donald, Goofy, and Mickey Mouse's dog, Pluto. They're on a quest to find the wielder of the Keyblade, and are seeking the help of Squall Leonhart, here known as Leon. Donald leads the way and Goofy obediently follows, but Pluto sneaks into the alleyway where an unconscious Sora is located. Eventually, Sora wakes up, mistaking the scene for a dream only to discover that it's not a dream, and that he's in a different world. From the alleyway where you start, take a turn and head down the path to see the entrance to District 1 and Traverse Town altogether. From the stairs, turn around and walk into the building. This is Cid's accessory shop. After Cid and Sora have a conversation, you'll be free to explore the area. There is a also a Save Point in the shop. Next to Cid is a wall cabinet with a treasure chest sitting on top. After getting out of the shop, go down the stairs, turn right and then back for a treasure chest (opened by using Blizzard on all the candles).
To the left of the accessory shop is the item shop, run by Donald's three nephews, Huey Louie and Dewey. Go out the back door to be taken to another alleyway. Right to the left of the main staircase is a mailbox. If you give it 10 post cards, you'll get a prize. The first post card can be found right inside the item shop. From the counter, lock-on to the ceiling fan with . Jump from the counter and hit it with your keyblade for the first post card. Go back to the mail box to give it the post card. The second post card will be outside Cid's shop. Carry a box to the side with the man standing near it. Walk around and open a treasure chest containing the second postcard. After sending both postcards, you will receive a Mythril Shard. Behind the accessory shop in an alleyway will be a safe. Examine it for the third post card after your battle with Leon (otherwise it is locked).
Onto the Second District
Behind Cid's accessory shop will be the doors to the second district. Walk into them for a cutscene.
When Sora arrives, the first thing he sees is a man's heart being taken away by a Heartless. After the cutscene, you must battle them. After the battle, turn right to the corner of the railing. Jump on the lantern on the corner. From there, jump across on the roof and open the treasure chest to obtain your third post card. Walk back to the entrance and go left, opposite of where you were before. Go through the door to enter the hotel. At the moment Sora enters the hotel, Donald and Goofy will come wandering into the district, still searching for Leon and the wielder of the keyblade. The two will dismiss the area to look elsewhere. Exit the hotel to battle another group of Heartless. At the end of the path will be the Gizmo Shop. Enter to see Donald and Goofy come out of the hotel just as Sora enters, still looking. Battle the multiple groups of Heartless that attack you inside the shop for EXP. Exit the Gizmo Shop and then go into the Alleyway, located inside the double doors at the end of the path opposite the front of the Gizmo Shop. Another scene shows Donald and Goofy entering the area just as Sora leaves, again with wrong timing. A treasure chest containing a Potion will be to the left from where you entered, hiding behind crates. Lift the box with the star design and set it down next to the view of the hotel you have from the Alleyway. Use it as a step up to the small roof next to the porch. A treasure chest will be there, containing a Pretty Stone. Jump across the porches to the other end of the Alleyway for another treasure chest with a Potion. Jump down and enter the tall double doors. This is the Dalmatian house. You will be told the 99 puppies are scattered around various worlds. Find them for rewards. Leave through the other side of the Dalmatian house to be taken back to the main area of the district. Go back to the entrance and return to the First District.
Enter the accessory shop and exit through the other side (leading to the main area of the district) for a cutscene. Sora will meet Leon, who asks him to hand over the keyblade. Sora refuses, and the two battle instead.
After the battle, a cutscene will show Sora standing over an exhausted Leon. Sora starts a sentence, but isn't able to finish as he falls over in exhaustion. Yuffie then comes over, and Leon claims he went easy on him.
A change in the point of view will show Donald and Goofy exploring the Alleyway, still searching for a sign of the Keyblade. Aerith will then show up, and the point of view will switch back to Sora. Sora mistakes Yuffie for Kairi, saying he's glad she's okay. She then proclaims herself as the Great Ninja Yuffie, and Sora is taken back to the real world. While Yuffie and Leon explain the situation to Sora, Aerith is explaining it to Donald and Goofy. After Sora asks what happened to his home, Riku, and Kairi, Leon ends the conversation by saying he doesn't know. Open the blue treasure chest on the table for an Elixir. Go to Leon and he'll ask you if you're ready. Say you are for another cutscene. After the cutscene, leave the hotel and start fighting the Heartless for EXP. Go through a path to the left from the entrance of the district to find a door leading to the third district.
After making it to the third district, a cutscene will show Donald and Goofy looking around as Sora enters. Donald and Goofy are then faced by Heartless. Goofy cowers behind his shield while Donald is ready for a battle, only for both to be thrown off the balcony, landing on Sora. Donald and Goofy then notice Sora's Keyblade, only for the three to be blocked inside the third district and attacked by Heartless. You will be fighting the Heartless with a party for the first time. After you defeat them, a cutscene will show the next boss, Guard Armor, entering the arena.
After you defeat Guard Armor, a cutscene will start up. Donald and Goofy tell Sora that they were looking for him, and Leon and Yuffie come to tell Sora that they were seeking the wielder of the Keyblade as well. Donald and Goofy make a proposition to Sora to explore the other worlds with them using their Gummi Ship, but Sora still has his mind on Riku and Kairi. Donald tells Sora he's sure they can find the two if he comes with them, though he's just saying so to get the wielder of the Keyblade to help find the King. Leon also encourages Sora to go with them, which he eventually agrees to. Another cutscene will show villains plotting against Sora.
After the scene, you are brought back to Sora, who is being talked to by Leon, Yuffie, and Aerith. They give him 100 munny, the currency of Traverse Town, to spend in the item and accessory shop, urging you to explore. Leon also gives you Elixir, and you will then be free to explore. When you enter the accessory shop, Goofy will point out the Trinity mark on the floor. Only the blue ones will react for now.
Leaving Traverse Town
After you're finished doing what you please in Traverse Town, you can leave through the large double doors that are pointed out to you by Donald and Goofy, who also give you the power of Fire, your first magic spell, and the ability to Dodge Roll, which lets you dodge enemy attacks easily. This will take you to the Gummi Ship, your source of transportation from world to world.