Several months after the disastrous encounter that brought Kong to Manhattan, Carl Denham (Robert Armstrong) is hiding from his relentless debtors in a boarding house. With numerous lawsuits looming over him, he is facing indictment by a grand jury for the catastrophic destruction caused by Kong. Seizing an unexpected opportunity when Capt. Englehorn (Frank Reicher) proposes a voyage to the South Pacific to embark on a new career as merchants, Denham eagerly accepts, bringing along the ship's chef, Charlie (Victor Wong).
Upon their arrival at the port of Dakang, resources are scarce, and tensions among the increasingly irate crew escalate. While in the village, Denham and Englehorn are treated to a variety show featuring trained monkeys and the enchanting vocals of Hilda (Helen Mack), who is presented as "La Belle Helene." The performance is marred by the plight of Hilda’s father, a once-celebrated vaudeville performer now reduced to poverty. Following a drunken confrontation, he is killed by a Norwegian skipper named Helstrom (John Marston), who reacts violently after being insulted. Chaos ensues when a lamp topples and ignites a fire, leading Helstrom to abandon Hilda, who bravely attempts to rescue her father and the stranded show animals.
The next day, Denham approaches the emotionally disconnected Hilda with surprising tenderness. He later confronts Helstrom, revealing to Englehorn that Helstrom had sold him the map to Skull Island, where immense treasure allegedly awaits. This revelation convinces Denham and Englehorn to return to the island in hopes of resolving their financial troubles. Yet, once on the voyage, Helstrom incites a mutiny among the crew. However, Red (Ed Brady), runs counter to Helstrom's plans, forcing him to abandon ship along with Denham, Englehorn, Charlie, and Hilda. The remaining crew sails away, leaving the five of them to venture towards Skull Island.
Upon landing, they are immediately met with hostility from the island's natives, who scare them away with spears. Eventually, they discover a secluded cove for their boat. Splitting up to forage for food, Denham and Hilda stumble upon "Little Kong," a 12-foot-tall white gorilla that Denham believes to be Kong’s offspring, caught in quicksand. Moved by compassion, Hilda persuades Denham to topple a dead tree to free Little Kong. When a giant bear attacks, Little Kong courageously comes to their aid, defeating the beast with the same tree. Hilda interprets Little Kong's actions as gratitude, while Denham remains skeptical. Their doubts are swept away when Little Kong leads them to a fabled temple adorned with treasure, where a priceless bejeweled necklace captures Denham's attention. They soon face a monstrous lizard, which Little Kong bravely dispatches.
Just then, Englehorn, Helstrom, and Charlie arrive at the temple, and Helstrom is startled to discover the riches there, realizing that his original story was fabricated to escape Dakang. Terrified by Little Kong, he attempts to flee back to the ship but meets a gruesome fate at the jaws of an elasmosaurus. Meanwhile, Hilda, Englehorn, and Charlie return to the boat while Denham and Little Kong continue their treasure hunt.
Unexpectedly, a devastating earthquake and hurricane strike the island, leading to its obliteration. Hilda, Englehorn, and Charlie desperately search for Denham as waters rise. Little Kong helps Denham reach higher ground, but as he finds himself trapped, he heroically sacrifices himself to save Denham, propping him above the rising waters until help arrives. Tragically, Skull Island sinks, taking Little Kong and its myriad fantastic creatures under the waves.
Fortunately, a passing navy ship rescues the surviving quartet. Later, Denham questions Hilda about Little Kong’s intentions, wondering if the creature understood his sacrifice. Hilda believes that animals possess an innate understanding. She proposes that Charlie and Englehorn receive one-third of the proceeds from the sale of the necklace, while she hopes to share the final third with Denham, confessing her feelings for him.
