In the Pride Lands of Africa, a lion rules over the animals as king. The birth of King Mufasa and Queen Sarabi's son Simba creates envy and resentment in Mufasa's younger brother, Scar, who knows his nephew now replaces him as heir to the throne. After Simba has grown into a young cub, Mufasa gives him a tour of the Pride Lands, teaching him the responsibilities of being a king and the circle of life. Later that day, Scar tricks Simba and his best friend Nala into exploring a forbidden elephant graveyard, despite the protests of Mufasa's hornbill majordomo Zazu. At the graveyard, three spotted hyenas named Shenzi, Banzai and Ed attack the cubs before Mufasa, alerted by Zazu, rescues them and forgives Simba for his actions. That night, the hyenas, who are allied with Scar, plot with him to kill Mufasa and Simba.
The animals of the Pridelands gather to witness the celebration of the newborn cub, Kiara, daughter of King Simba and Queen Nala. Simba's father, Mufasa, proudly watches over the ceremony from the Heavens above. As she grows older, Kiara becomes annoyed with her father's overprotective parenting. Simba assigns Timon and Pumbaa to watch her. Kiara ignores her father's warning and the duo's attention and enters the "Outlands," where she meets Kovu, a cub who was chosen by Simba's uncle Scar to be his heir. When Kovu retaliates to Kiara's playing, Simba confronts the young cub just as Zira, Kovu's mother, confronts him. Zira reminds Simba of how he exiled her and the other Outsiders, and she informs him that Kovu was hand-chosen to be Scar's successor.
The film is told through the perspective of Timon and Pumbaa through the literary device known as a frame story. The two are shown watching the original film, The Lion King, being shown in silhouette commenting on the movie being shown before them, in a style nearly identical to that of Mystery Science Theater 3000.
The film is set in Africa's Okavango Delta, and the main characters are a meerkat named Billy and a lion named Socrates. The annual flood has failed to arrive in the Delta, water has become scarce and the native animals fiercely fight over it. Billy and Socrates set out to find more water, and during their quest they meet a rag-tag group of animals from across the world: a polar bear named Sushi, a kangaroo named Toby, a Tasmanian devil named Smiley, two Galápagos tortoises named Winifred and Winston, a rooster named Charles, and a chimpanzee named Toto, all of whom have had their lives ruined by humans in some way and have travelled to Africa. The animals soon discover the reason for the lack of water in the Delta: a dam has been constructed to supply energy for a luxury resort owned by a man named Mr. Smith. Hunter, a poacher, kidnaps Socrates, while the other animals escape. The animals hold a conference where Winifred and Winston explain the deadly future that could be possible for animals. After the conference, however, Winifred and Winston pass away. That day, Billy and the other animals travel through the "Valley of Death" towards the dam. Hunter spots the animals and tries to stop them with a bi-plane, but is stopped by Toto. Maya, Mr. Smith's daughter, frees Socrates from his cage, and sends Hunter down a chute. Down at the bottom of the dam, the buffaloes and rhinos, including Chino and Biggie, charge into the dam. Billy hits a rock into a chute in the dam, which ignites a missile from Hunter's bi-plane, which destroys the dam, and frees the water. To celebrate the water coming back, they have a party. After the party, the animals travel to New York City, where the movie ends with the animals walking through the city with whales calling in the background.