In 1967, the daring British spy Austin Powers finds himself on a mission to eliminate his arch-nemesis, Dr. Evil, while in his vibrant nightclub, the Electric Psychedelic Pussycat Swingers Club. However, in a surprising twist, Dr. Evil escapes his clutches by launching himself into space in a rocket disguised as a Bob's Big Boy statue, subsequently opting for cryogenic freezing. In a bold move, Powers volunteers to undergo cryostasis, determined to re-emerge when Dr. Evil threatens the world again.
Fast forward to 1997, and Dr. Evil resurfaces with grand schemes for taking over the world. In this new era, he discovers that his former henchman, Number 2, has transformed his nefarious empire into Virtucon, a multi-billion-dollar corporation. Despite his newfound wealth, Dr. Evil concocts various plans to extort more money, only to discover that many of his ideas have come to fruition in his absence. Frustrated, he resorts to his typical strategies, including the theft of nuclear weapons to hold the globe hostage, while his ambition grows to a ridiculous target of one hundred billion dollars. He soon learns that his loyal henchwoman, Frau Farbissina, has utilized a sample of his own genetic material to artificially create his son, Scott Evil, who is now a rebellious Generation Y teenager, deeply resentful of his father’s legacy.
Meanwhile, upon hearing of Dr. Evil's return, the British Ministry of Defence decides to unthaw Powers, introducing him to the modern world with the help of Vanessa Kensington, the daughter of his long-time sidekick, Mrs. Kensington. Thrust into the 1990s, Powers discovers that his laid-back, free-loving lifestyle of the 1960s no longer resonates, and he faces significant challenges in charming Vanessa. When they masquerade as a married couple in a Las Vegas hotel, they encounter Alotta Fagina, the Italian secretary to Number 2, leading to an unexpected rendezvous.
During his covert mission in Alotta's luxurious penthouse, Powers inadvertently becomes entangled with her, only to uncover Dr. Evil's sinister "Project Vulcan." This diabolical plan seeks to drill a nuclear warhead into the Earth’s molten core to instigate worldwide volcanic eruptions. In response to Powers’ resurgence, Dr. Evil develops a battalion of dangerously seductive female robots, known as Fem-bots, designed to seduce and eliminate him. Recognizing the gravity of his actions, Powers reassures Vanessa of his fidelity after their brief affair and pledges to focus solely on her.
The couple bravely infiltrates Dr. Evil's lair but soon finds themselves captured by his henchman, Random Task. As Dr. Evil makes his menacing demands known to the world, he reveals that despite acquiring the wealth he seeks, he will still pursue his destructive Project Vulcan. Subsequent to placing Powers and Vanessa in a perilous death trap, they manage to escape. Powers cleverly distracts the Fem-bots with a striptease, causing their explosive demise.
In a twist of fortune, Vanessa returns with British reinforcements just in time for Powers to locate and deactivate the doomsday device. Confronting Dr. Evil amidst the chaos, Powers must rescue Vanessa while thwarting Dr. Evil's grand plans. With a shocking betrayal from Number 2, who appears to be killed by Dr. Evil during his escape, Powers again narrowly escapes a disastrous fate. As the lair self-destructs around them, Vanessa knocks Alotta unconscious, allowing the duo to flee just before the explosion.
Later, Powers and Vanessa celebrate their love by tying the knot, yet their honeymoon is interrupted by a vengeful Random Task. In an intense showdown, Powers prevails and, seeking solace on their balcony, the couple indulges in their passion. However, looking through a telescope, Powers is alarmed to see what he believes is a bright star – revealing it to be Dr. Evil's cryogenic chamber as he vows to come back for revenge.
