In a flashback, King Harold and Queen Lillian are filled with despair over their daughter, Princess Fiona, who remains trapped by her curse in the Dragon’s Keep. Despite their agreement with the Fairy Godmother, they seek help from Rumpelstiltskin, who has a magical contract promising to free Fiona if they relinquish the Kingdom of Far Far Away. However, signing the contract would lead to their own demise. Just as Harold is about to sign away their fate, a messenger arrives with the news that Fiona has been rescued, thanks to Shrek’s arrangement with Lord Farquaad. Since then, Rumpel has harbored a deep grudge against Shrek for thwarting his plans for power.
Fast forward to the present day, Shrek is weary of his responsibilities as a family man and the pressures of celebrity. While celebrating his children's first birthday in Far Far Away, a series of unfortunate events drive him into a fit of rage, leading to an explosive argument with his beloved wife, Fiona. Observing Shrek's outburst, Rumpel seizes the opportunity to follow him into the forest, feigning distress to gain Shrek’s sympathy. During their conversation in Rumpel's carriage, Shrek laments that he no longer feels like a "real ogre." Rumpel proposes a deal: in exchange for a day from his childhood, Shrek can experience one day of being his true ogre self. Eager for a return to his old life, Shrek signs the contract and is abruptly thrust into a bizarre alternate reality.
In this new world, villagers fear him, and he engages in playful mischief, only to discover that Fiona is now a fugitive and his beloved swamp lies barren and abandoned. Seized by witches, Shrek is brought before Rumpel, who now rules Far Far Away. Rumpel reveals the grim truth: by trading away the day of his birth, Shrek has unwittingly erased his own existence in this warped timeline. This power shift led to Harold and Lillian surrendering the kingdom to Rumpel, resulting in their disappearance when Shrek never came to be. If the day ends, Shrek will vanish forever.
With the assistance of Donkey, who initially fears Shrek but warms up after seeing his emotional turmoil, Shrek escapes Rumpel's lair. Together, they uncover a hidden escape clause in the contract—“true love's kiss” can nullify the deal. Their journey leads them to a still-cursed Fiona, who now leads a rebellion of ogres against Rumpel’s tyrannical rule, along with a lazy, overweight Puss in Boots, who has become Fiona’s pet. Shrek makes several attempts to win Fiona back, despite her growing despair over never finding true love and being preoccupied with the battle against Rumpel. Guided by Puss, Shrek perseveres in wooing her.
During an epic ambush against Rumpel’s forces, many of the ogres are captured by the Pied Piper, hired by Rumpel. In a desperate bid for freedom, Shrek insists that Fiona kiss him to break the curse, but to his dismay, it fails to produce any results. Rumpel then publicly announces a reward for Shrek’s capture, prompting Shrek to voluntarily surrender. To his surprise, Rumpel must grant Shrek one wish, which he uses to free the other ogres. However, as Shrek is imprisoned, he learns that Fiona has also been captured and is still not free, as she is not fully "all ogre."
With the help of Donkey, Puss, and the freed ogres, they storm Rumpel's fortress, subduing him and defeating his army of witches while Shrek and Fiona face off against Dragon. As dawn breaks, Shrek begins to fade away. Yet, in an unforgettable moment, Fiona, having genuinely fallen in love with him, kisses him just before he disappears. In this defining instant, she realizes that her curse has been lifted, seeing herself as she is when the sun shines—an ogre, symbolizing the transformation brought about by true love.
As the alternate reality crumbles, everyone vanishes, and Shrek finds himself back in the original timeline, just before losing his temper at the birthday party. This time, rather than venting his frustrations, he embraces his family and friends with a renewed sense of gratitude. Ultimately, Shrek throws a memorable celebration in his beloved swamp, inviting all his friends, family, and ogres, while ensuring Rumpel is locked in a cage for the rest of his days, a fitting end to his scheming ways.
