Several weeks following the events of the first film, FBI agent Gracie Hart finds her newfound fame compromised when her cover is blown during an attempt to thwart a bank robbery. Although her quick thinking results in the capture of the criminals, the FBI concludes that Gracie can no longer serve in field operations. In a bid to leverage Gracie's public recognition, FBI Director Harry McDonald (played by Ernie Hudson) decides to position her as the bureau's new "face." After a breakup with her boyfriend, fellow agent Eric Matthews, who is reassigned to Miami, Gracie reluctantly accepts the new role.
As fate would have it, FBI agent Sam Fuller arrives in New York from Chicago due to anger management issues, and her initial encounter with Gracie is tumultuous, filled with disdain as Sam hurls insults at her. However, the FBI sees fit to assign Sam as Gracie's bodyguard, much to Sam's irritation. Meanwhile, Joel, Gracie's stylist, diligently prepares her for a life of public appearances, emphasizing strict manners — "No hitting, no chewing with mouth open, no snorting."
Fast forward ten months, and Gracie now thrives as a media personality, making appearances on popular morning television shows, including Live with Regis and Kelly, The Oprah Winfrey Show, and the Food Channel, where she dispenses fashion advice and promotes her book. A schoolgirl named Priscilla expresses her desire for Gracie to visit her school, hoping to inspire her classmates that being an agent is "cool."
Despite their clashing personalities, Sam is informed by McDonald that failing the Gracie assignment could spell the end of her career at the FBI. The tension escalates when Gracie's friends, Cheryl Fraser, the reigning Miss United States, and Stan Fields are kidnapped in Las Vegas. Gracie's job shifts to managing public relations, aiming to project an image of control by the FBI while her friends face peril.
Kidnappers Karl and Lou Steele, acting on orders from a mysterious figure known as Mr. Grant, realize Cheryl's worth and demand a ransom of $5 million. Gracie begins her investigation by interrogating the limo driver, Tom Abernathy, who had a suspicious route the day of the kidnapping. This eventually leads her to make the bold decision to go undercover to rescue her friends, taking Sam along for the mission despite their rocky relationship.
Disguised as an elderly woman with the help of Joel, Gracie infiltrates the old age home from where Cheryl and Stan were taken. She learns of Stan's love for gambling and his dealings with loan sharks, heightening the urgency of the situation. The kidnapping escalates to dangerous new heights as the criminals plot to transform the Treasure Island hotel into a lethal scene.
In a nail-biting twist, Gracie's undercover efforts lead her to the Oasis Drag club, where amidst lively performances and a sea of impersonators, they gather crucial information about the whereabouts of Cheryl and Stan. When the kidnappers plan their final act, the pressure falls on Gracie and Sam to save the day. With clever strategy and teamwork, they confront the villains, save Stan, but Gracie's own life is put at risk while rescuing Cheryl.
In a suspenseful climax, Sam dives in to save Gracie, showcasing their evolving partnership. Cheryl begins a romantic relationship with Jeff, underscoring the film's lighter themes, while Gracie seizes the opportunity to inspire young girls by visiting Priscilla's school, advocating for self-empowerment and resilience.
