Paddington, voiced by Ben Whishaw, has integrated himself into the Brown family, which consists of Hugh Bonneville as Henry Brown, Sally Hawkins as Mary Brown, Madeleine Harris as Judy Brown, and Samuel Joslin as Jonathan Brown, all residing in the cheerful Windsor Gardens. As he becomes a cherished member of the community, Paddington dedicates himself to providing comfort and emotional support to everyone around him. In a heartfelt endeavor to celebrate Aunt Lucy's (Imelda Staunton) 100th birthday—a gesture spurred by her sacrifice of venturing to London to raise him—Paddington strives to acquire a unique pop-up book from the antique store owned by Jim Broadbent, a venture that leads him to take up multiple odd jobs to save money. However, his efforts are thwarted when the book is stolen right before he can buy it.
Determined to retrieve the precious book, Paddington witnesses the burglar in action and pursues him, but to his dismay, the thief escapes, leaving Paddington unjustly accused and arrested. Despite the disbelief of Mr. Gruber and the Browns regarding his guilt, the lack of evidence to confirm the burglar’s existence leads to Paddington's wrongful conviction. The true culprit soon comes to light—Phoenix Buchanan, an egotistical actor portrayed by Hugh Grant, who is fixated on the book's potential to lead him to a hidden treasure, which is cleverly concealed within its pop-up illustrations of London.
While Paddington serves time in prison, he forms unexpected friendships with the inmates, including the grumpy chef Nuckles, brought to life by Brendan Gleeson, who quickly becomes impressed by Paddington's renowned marmalade sandwich recipe. Meanwhile, the Browns are tirelessly working to clear Paddington’s name, utilizing sketches of the thief to gather information. Their investigation takes a fascinating twist when they consult a fortune teller who divulges that the stolen book is key to uncovering the fortune of its original author—a famous circus artist who met a tragic fate at the hands of a sinister magician intent on claiming her riches. The link between Buchanan and the magician is revealed, as he is the grandson of the magician.
With Paddington’s cheerful presence enlivening the prison's atmosphere, he finds it increasingly difficult to maintain his optimism when the Browns seem unable to prove his innocence. Convinced of Buchanan's misdeeds, the Browns decide to search his home for the stolen book. They stumble upon a hidden attic filled with theatrical costumes, ultimately leading them to the very book they seek. Just when they are about to act, Buchanan returns home, setting off alarm bells in their minds. Meanwhile, a missed prison visit leaves Paddington feeling isolated and forgotten by the Browns.
In an unexpected turn, Paddington takes part in a hasty prison break alongside several inmates, including Nuckles, who initially promises to help him secure his freedom but ultimately decides to pursue his own escape. Declining the invitation to leave with him, Paddington cunningly evades capture while reaching out to the Browns for help. They manage to confirm that Buchanan is the true villain, orchestrating a plan to catch him as they convene at Paddington Station, where a train is scheduled to depart, believed to carry the secret to the hidden fortune.
As Paddington boards the train just in time, the Browns leap aboard another steam train to chase after him. In a thrilling confrontation, Henry Brown and Mrs. Bird, played by Julie Walters, engage Buchanan, who momentarily gains the upper hand before making his escape. Meanwhile, Paddington is trapped in the rear carriage, which Buchanan maliciously uncouples, sending it racing toward disaster in a river. Mary Brown desperately attempts to free Paddington, with a little assistance from Nuckles and the other inmates, who ultimately have a change of heart and rally to help him.
As the climax unfolds, Henry manages to thwart Buchanan just as he seeks to unveil the so-called treasure, leading to his arrest. Now cleared of all charges, Paddington faces a period of illness, slipping into a brief coma after the chaotic events. Fortunately, he wakes just in time for Aunt Lucy's birthday, albeit feeling disheartened that he couldn’t present her with a gift. However, in a heartwarming twist, he finds that the Browns, along with the entire neighborhood, conspired to bring Aunt Lucy to London so she could experience it first-hand. Their joyous reunion culminates in an emotional embrace, celebrating her special day.
Meanwhile, justice is served as Buchanan receives a ten-year prison sentence. Six months later, he is seen utilizing his theatrical past to entertain his fellow inmates, presenting a delightful twist of fate in his new life behind bars.
