A few weeks following the events of the first film, Farmer Arthur Hoggett finds himself injured in an accident while he and Babe attempt to repair the farm's well. This unfortunate event leaves his wife, Esme, to manage the farm on her own. With the looming threat of eviction at the month's end due to unpaid mortgage, Esme decides to take Babe to a sheepdog herding contest, hoping that the prize money will be enough to save their home.
In the bustling city of Metropolis, an overly zealous beagle named Snoop mistakenly signals that he and Esme are transporting drugs at the airport, causing them to miss their flight and resulting in a few days' delay before they can head back. Initially struggling to find pet-friendly accommodation, Esme and Babe finally find refuge at the Flealands Hotel, managed by the kind-hearted Miss Floom, who welcomes stray animals into her establishment.
Once settled, Babe is separated from Esme and encounters a group of cheeky chimpanzees – Bob, his expectant wife Zootie, and her younger brother Easy – along with Thelonius, a refined Bornean orangutan who serves Miss Floom's aging uncle, Fugly. Babe is reluctantly roped into their clown act, initially hesitant until he learns that he could potentially earn money, which he sees as crucial for the farm's rescue. Unfortunately, his involvement leads to chaotic mishaps rather than success. Meanwhile, Esme, believing Babe has gone missing, embarks on a search, only to find herself arrested due to a misunderstanding involving police and a motorcycle gang.
The following morning brings more chaos as Fugly ends up in the hospital after bingeing on food. With their caretaker in distress, the other animals at the hotel grow hungry, leading the chimpanzees to scheme a theft from a nearby store, with Babe used as a decoy to divert the attention of guard dogs. In a twist of fate, Babe ends up saving one of the dogs, forging a new bond that makes the grateful dog his bodyguard.
Just as things seem bleak, Babe's best friend, Ferdinand, arrives at the hotel and joyfully reunites with him following the birth of Zootie's twins. However, their joy is short-lived when animal control officers, alerted by the Flooms' hostile neighbor, Hortense, raid the hotel and capture most of the animals. Babe, Ferdinand, and two remaining guests – the Flooms' capuchin, Tug, and a disabled Jack Russell Terrier named Flealick – hatch a plan to infiltrate the animal control facility and rescue their captured friends.
After their successful mission, Esme returns to the now-chaotic hotel, where she finds Miss Floom grieving her uncle's fate and the lost animals. Determined, they confront Hortense and track down the animals to a charity dinner, leading to a heartwarming reunion. With newfound determination, Miss Floom decides to sell the hotel, using the funds to help Esme save their farm. As Esme resumes her responsibilities while Arthur finally completes the repair on the water pump, he affectionately tells Babe, > "That'll do, Pig. That'll do."
