The flee powder is one of Fluffy's two big inventions, the other being his super-suit. It is a green, snow-like substance that upon contact instills an irresistible urge to travel and take up residence far away from the victim's current habitat. The effect may weaken over time, but does not seem to go away until a victim consciously questions their urge.
Failing first at controlling the people of St. Canard, Fluffy changed tactics to simply get rid of them to claim the city for cats. For this goal, he created the flee powder. Flee powder is a green sticky powder not unlike snow structure-wise. I can be kneaded into various forms that will last a good while. This is presumably intentional, as flee powder apparently has to come into contact with its victim near the head. Darkwing and Launchpad could pick up the flee powder with their bare hands with seemingly no ill effects. Those only kicked in when they got flee powder-balls in respectively their neck and face. A snow-like structure may have been meant to manipulate people into throwing it to one another's heads. The flee powder generates an overriding desire to move thousands of miles away in its victims. During this time, the victim is convinced they have a reason to go too. It appears the effect weakens over time, but if it can go away on its own is not clear. It required Gosalyn to demand the adults' reason for moving before they realized they'd been brainwashed, but this may have merely sped up the natural process of the effect. Either way, flee powder is a one-time deal; anyone who's fallen victim to it once is immune from then on out. Mutants, or at least the elemental variety, are immune by default.
Disney Adventures comics
After doing jailtime for his takeover of St. Canard, Fluffy returns to the King of the Sea canning factory to work on his next takeover plan. He develops the flee powder in the days following. Once done, he distributes it gradually across the city to clear out the streets one by one. Once the first few hundreds people have left in a rush, Darkwing Duck rides out to investigate the situation. While taking a closer look at the "green snow", both Darkwing and Launchpad come in contact with it and rush home to fetch Gosalyn and move to a forest in Canarda. Once there, Gosalyn's questions as to why they suddenly had to pack their bags breaks the flee powder's influence and the two crimefighters correctly conclude the "green snow" is the cause of their and all other St. Canardians' behavior. They return to the city to see the last civilians make their way out, although upon entering the streets it turns out this does not mean all citizens are gone: mutants are immune to the flee powder's effect. On their search for Fluffy, Darkwing and Launchpad encounter 3/5th of the Fearsome Five, who after a nasty encounter with Fluffy of their own agree to help the crimefighters. They prove utterly useless, but at the same time the flee powder reveals itself a one-time use concoction as it can only affect anyone once. As such, Darkwing can freely take on Fluffy. One of his tactics even consists of him pretending to be a psychiatrist, operating with a patient couch made from the flee powder. Eventually, Fluffy is defeated and he returns to jail willingly. The flee powder presumably got cleaned up after that.