Following their recent release from prison, the original Bad Guys have undergone a significant transformation, shifting from their notorious criminal ways to become genuinely good. Despite their efforts to reintegrate into society, they find it surprisingly challenging to fit in and be accepted by others. The group consists of Craig Robinson as Mr. Shark, Anthony Ramos as Mr. Piranha, Zazie Beetz as Diane Foxington, and Awkwafina as Ms. Tarantula. Each of them struggles with their new identities, particularly with finding jobs to support their new, reformed lives. While Wolf, Shark, Piranha, and Tarantula often face rejection and disappointment, Snake tends to stay out of town, usually away from the others.
Inspired by Diane, a clever and compassionate character who believes in giving people a second chance, Wolf begins to see the importance of earning genuine trust and respect. She encourages him and the others to find meaningful ways to contribute to society. When a dangerous criminal known as the Phantom Bandit starts causing trouble, Wolf takes it upon himself to help Commissioner Luggins track down the elusive thief. Their investigation initially points to Snake as the prime suspect, especially after they discover evidence linking him to the crimes. However, the truth soon becomes clear when Snake explains that he was with his new girlfriend, Susan, at the time—a detail that clears his name.
Things take a dramatic turn at a "Lords of Lucha" wrestling tournament, where the Bad Guys attempt to expose the real Phantom Bandit. Unfortunately, they are framed for the bandit's crimes, which puts them in a dangerous situation. Determined to prove their innocence, Wolf contacts Diane, who agrees to come to their aid. The plot thickens when the Bad Guys are kidnapped by a group of women criminals—Danielle Brooks as Kitty Kat, Maria Bakalova as Pigtail, and Natasha Lyonne as Doom. Doom had previously used the alias "Susan" and was manipulating Snake to lure the group into a trap.
The women criminals steal a highly experimental rocket called MOON-X, aiming to use its powerful magnet attached to the space station, which contains a rare metal called MacGuffinite, to siphon all of the world's gold. Using secret footage they obtained, which reveals that Diane was once known as the Crimson Paw—a notorious criminal identity—the criminals blackmail her into cooperating, afraid that exposing her past will ruin her. Wolf, feeling the pressure to protect Diane and his friends, reluctantly agrees to help them with the heist.
Meanwhile, Diane visits their imprisoned foe, Professor Marmalade, who unveils the sinister plan: the space station's magnet, combined with the MacGuffinite, could wipe out all global gold reserves and cause chaos. Racing against time, Diane tracks down the location of the Bad Girls and heads to the MOON-X station to stop the villains from executing their plan. The group’s first move involves stealing a smartwatch belonging to Mr. Moon at his wedding, providing them with a crucial advantage. Kitty Kat, true to her scheming nature, gives Wolf a flash drive containing compromising footage, but then traps the group after recording her confession. She uploads this recording online, exposing Diane’s secret past to the world, which leads to her career and reputation as a governor being completely destroyed.
Despite the devastating reveal, Diane bravely confronts the criminals just moments before they intend to launch the rocket. However, Kitty Kat's cunning plan is now live, and her assault on Diane results in her being tranquilized. Seizing the opportunity, Diane manages to sneak onto the rocket, still half-asleep and disoriented. The authorities, led by Alex Borstein as Chief Misty Luggins, arrest the Bad Guys, but Luggins, having developed a newly-found confidence and trust in them, secretly helps Wolf and his friends board the departing rocket via helicopter, ensuring they aren’t left behind.
Once in space, the tension escalates. Pigtail and Doom hesitate to attack the group, but Kitty's unrelenting nature pushes her to overpower their controls and magnetize a huge amount of gold using the rocket’s magnet, threatening global economic stability. Wolf, quick-thinking, steals the watch that controls the magnet, allowing him to redirect the rocket toward the space station and dismantle the magnet's power, thus saving the gold and preventing catastrophe. During the chaos, Doom and Pigtail work together to rescue Snake and Piranha, who had become stranded in space. Kitty Kat tries to eliminate Wolf, but Diane intervenes and defeats her, proving her bravery and strength.
In the climax, Wolf and Diane share a heartfelt moment, sharing their first kiss after everything they’ve been through. The space station begins to plummet back toward Earth, but the team manages to escape, with Pigtail and Doom fleeing in an escape pod just in time. After their crash landing, Kitty Kat is caught and sent to prison, while Doom and Pigtail are sentenced to community service. The story concludes with Misty Luggins faking the deaths of the Bad Guys and Diane, allowing them to continue their secret lives as undercover agents, ready to protect the world from new dangers while keeping their true identities hidden from the public eye.
