This achievement is unlocked in Toy Box mode.
Edit: You will need to have purchased the TNT shack before this mission unlocks.
Shortly after blowing up the dam, Mayor Hamm will be kidknapped by bandits. Follow the compass to locate the bandits area (it's just to the right of Slinky).
Once you arrive, you have to blow up 5 shacks with TNT. 4 of them are located at the top of the area, while 1 is hidden below ground (you can fall down to a bridge crossing the river to reach it quickly). Simply collect the TNT and throw it at the shack to destroy them.
Once you have blown up all 5, Mayor Hamm will be released and the achievement will unlock.