Get all the Chao containers. The third container will have the unicorn inside.

Play the level as Sonic (the first level of the Hero story) and get the three Chao boxes. The first Chao box should have a Chao key in it. It is at the part (to the right) where you go upstairs. The second one should have four animals in it. It is located down a rail where there is a thing that boosts you down the rail and up a ramp at the end of the rail. The third Chao box should have the unicorn in it. It is at the place where you run down the top of a building and bounce. When you bounce, hold Up until you land on a bar and start swinging. While you swing, you will see a red slash of Sonic's Shoes every once in a while. Try to press A when the shoes slash. If done correctly, you will swing off onto another bar and start swinging again. Repeat and you should swing off onto a platform. On the platform is the last Chao box. Repeat to get as many Unicorns as needed. With Unicorns, your Chao will grow a horn in the middle of its forehead, a pony tail, little hooves, pony ears, and some of its body will change colors.