Twenty years have passed since the events of the original film, and Lloyd Christmas (Jim Carrey) has been residing in a mental institution, a result of his ill-fated romance with Mary Swanson (known as "Mary Samsonite"). After visiting Lloyd, Harry Dunne (Jeff Daniels) realizes that Lloyd's commitment was nothing more than an elaborate prank. Eager to escape their mundane lives, Lloyd persuades Harry to leave the institution with him and return to their apartment.
Upon arriving, Harry reveals a concerning issue: he suffers from a kidney problem and is in desperate need of a donor. Their search for a solution leads them to Harry's adoptive parents, but they discover he cannot receive a kidney from them due to his adoption. However, during a trip to Harry's old home, his father hands him a stack of overdue mail, including a startling postcard from his former girlfriend, Fraida Felcher (played by Kathleen Turner). The postcard announces that she is pregnant and calls for Harry to contact her. Convinced that they could find Harry's long-lost child who might match as a kidney donor, the duo sets off on a mission.
Their first stop is the funeral parlor where Fraida works. She informs them that she gave up her daughter, Fanny, for adoption. After showing them a picture of Fanny, Lloyd is captivated and instantly falls for her. Determined to locate Fanny, now renamed Penny (Rachel Melvin), they commandeer a hearse and journey to her home in Maryland.
Penny is preparing to attend a KEN Convention in El Paso, Texas, where she will be speaking about her father's legacy, and she has a valuable package meant for one of the convention's physicians. Unbeknownst to her, her adoptive mother, Adele (Laurie Holden), is secretly plotting to poison her husband, Dr. Bernard Pinchelow, with the assistance of the family’s housekeeper, Travis. After Harry and Lloyd explain their situation to the Pinchelows, Bernard realizes Penny has forgotten her important package, which he says is worth billions. Adele seizes the opportunity to send Harry and Lloyd on a mission to retrieve it.
As they embark on their journey, Travis becomes increasingly irritated with their antics. In a chaotic moment, a firecracker is set off in the hearse, leading to unexpected consequences. After a series of misadventures, including finding their old van and later stealing a Zamboni, the duo finally arrives at El Paso for the convention.
At the convention, Harry is mistaken for Bernard, leading to several comedic mishaps. Tension arises between Harry and Lloyd as Harry realizes Lloyd is interested in Penny. Meanwhile, Adele arrives at the convention and exposes the truth about Harry's identity, leading to a chaotic evacuation. When Lippencott, Travis's twin brother, attempts to confront them with a gun, the situation escalates dramatically. Just as the climax unfolds, the police arrive, revealing that Bernard is alive and well, having foiled Adele’s plans.
In a shocking turn of events, neither Harry nor Lloyd is Penny's father; it turns out, her biological father is a deceased friend from high school, Pete Stainer (whom they humorously referred to as "Pee Stain"). Leaving El Paso, the duo spots two attractive women and opts for a juvenile prank by tossing them playfully into a bush as they hastily make their exit.
In a humorous post-credit scene, Harry and Lloyd find themselves back in the Zamboni, lamenting over mistakenly swapping milkshakes. This compression of chaotic personalities leads them to an encounter with their old enemy, Sea Bass, culminating in yet another misadventure as they drive home, laughing and high-fiving each other, oblivious to the trouble yet to come.
