The film's story continues from where the first left off, and starts with the Incredibles about to fight the Underminer as he makes his way towards City Hall while also grounding buildings and robbing the city bank. Meanwhile, while Violet and Dash were meant to watch Jack-Jack, Violet's love interest Tony Rydinger discovers her superhero identity, forcing agent Rick Dicker to erase his memory. The Underminer manages to rob the bank for a large amount of money and escapes in his tunnelling machine, leaving the Incredibles and Frozone (Lucius Best) to stop his drill machine from destroying City Hall. While the supers succeed, they are arrested by the police for breaking the anti-super law. Despite the Incredibles and Frozone preventing the Underminer's drill from inflicting more property damage, the authorities are more concerned with the level of damage caused by the debacle. Dicker informs the Parr family that his department in the Super Relocation program is being shut down as a result of the battle with the Underminer. As a result of this, supers are once again forced to permanently adhere to their secret identities.
At dinner, the family argue over whether they should fight crime, with Helen (Elastigirl) arguing against since it is illegal to and the others minus Jack-Jack arguing for it since it is the right thing to do. By the pool, Bob (Mr. Incredible) and Helen are met by Lucius, who tells them he was offered by a mysterious man to change the law banning Supers. Bob and Helen leave the motel with Lucius.
The three supers are chauffeured to Devtech, a world-famous telecommunications company headed by Winston Deavor and assisted by his sister Evelyn declaring that he wants the Super Relocation Program revoked as much as they do. When, Bob, Helen, and Lucius visit him, Winston proposes a plan to help give back the superheroes public support by setting up missions and publicity stunts to better their reputation. He enlists Elastigirl due to being the least destructive out of the three to which she agrees. Winston offers the Parrs a new home as a sign of appreciation and giving Elastigirl a new suit and bike, leaving Mr. Incredible and the kids to embark on her first mission.
Flying out to New Urbem, Elastigirl stops a newly built monorail train from crashing after it unexpectedly goes backwards at high speeds. She discovers that the train driver was under the influence of the Screenslaver, a villain who hypnotizes people through any monitor he hacks into. During an interview she encounters the villain again by exposing his plans to kill the Ambassador by hijacking the escort helicopter she's on, however, Elastigirl quickly comes to her rescue.
Meanwhile, Bob struggles with his new role as a stay-at-home parent and his kids have problems of their own. Dash has trouble with math homework and Violet becomes withdrawn after Tony unintentionally fails to show up at their date due to his memory wipe. Jack-Jack wreaks havoc with his burgeoning superpowers after seeing a raccoon outside that resembled a bad guy on TV. When Bob accidentally lets slip Tony's memory wipe, Violet is furious at him. He takes the family, minus Helen to the Happy Platter, where Dicker told Bob Tony works, but ends in embarrassment for Violet as she squirted water out of her nose when she saw Tony.
Elastigirl's recent actions have caused a movement of superheroes stepping out into the public, wanting to help out others like they did in the past. These include the likes of Voyd, He-Lectrix, Reflux, Screech, Krushauer and Brick. She manages to figure out the Screenslaver's location by pinpointing the signal where he broadcasts from another TV interview. Elastigirl arrives at the scene with the Screenslaver attempting to escape but manages to capture the villain, although the suspect claims to be a pizza delivery boy.
Exhausted, Bob takes Jack-Jack to his old friend, superhero-costume designer Edna Mode to look after him. Initially refusing to babysit him, she agrees upon seeing the baby’s superpowers. After Bob goes back home, he has a chat with Violet, who tells him he is 'super', but he falls asleep. Bob wakes up after sleeping for 17 hours, and goes to Edna's to pick up Jack-Jack. Edna shows Bob how the baby's suit works, and that he can use a device to control his powers.
A victory party is held at Devtech to celebrate Elastigirl's capture of the Screenslaver and the global legalization of Supers. Winston Deavor announces the televised signing of the International Supers Accord by the ambassadors of the United League of Nations to be held at the Everjust superyacht the following morning. Elastigirl then investigates deeper into the identity of the Screenslaver , and as she ends up in Evelyn's control room, she notices something strange in one of the monitors. It turns out that one of the Screenslaver's monitors during the fight earlier was connected to her suit-cam. As Elastigirl delved deeper into truth, Evelyn enters and played along until Elastigirl figured the pizza boy was being hypnotised. Evelyn immediately slaps a pair of hypno-goggles on Elastigirl's eyes before she could alert anyone, rendering her unconscious. Later, Evelyn reveals to an awake Elastigirl that she is the mastermind behind the Screenslaver; stating that she despises superheroes and sees her brother's mission as a threat to humankind's independence. She claims that she will use Elastigirl to make Supers illegal forever.
Back at home, Bob demonstrates Jack-Jack's powers using his new supersuit and device to his elder children, who are excited by the array of his powers. Bob then gets a call from Evelyn who claims that his wife needs help, but is using the call to lure him so she can hypnotise him. Bob tells Lucius to come over to babysit the kids while he is home. The kids suit up and Lucius arrives, but are then greeted by the hypnotized wannabe supers. They manage to hypnotize Lucius, but the kids escaped in the Incredibile that Dash summoned. Meanwhile, Mr. Incredible meets Evelyn on the Everjust to ask about Elastigirl. After initially attack him Elastigirl kisses her husband to make him an easy target to place a pair of hypno-goggles on.
Meanwhile, Dash, Violet, and Jack-Jack use the Incredibile to get to and sneak aboard the Everjust. On the superyacht, there is a hearing of leaders to re-legalize superheroes, with Ambassador Selick being the first to sign the International Supers Accord to legalise supers. Violet leaves Jack-Jack with Dash and looks for their parents, but knocks over a pot plant and alerts the hypnotized wannabe supers. Voyd finds and fights Violet, but fails to put a pair of hypno-goggles on her. While the kids are trying to find their parents, Mr. Incredible, Elastigirl and Frozone are commanded by Evelyn to give a speech that puts supers in a bad light. Everyone else on the superyacht including Winston is hypnotized so that the three hypnotised supers can divert the vessel towards shore, putting many lives at risk and tarnishing the reputation of supers.
However, the children find their parents and Frozone. Jack-Jack removes the hypno-goggles on Helen, who then frees Bob and Lucius and reveals Evelyn's plan to them. The wannabe supers are released from their hypnosis as well, and a plan to stop Evelyn and stop the ship from crashing into the city is put in place. Winston is taken by Evelyn to her jet to escape, but Winston refuses and instead saves the guests from hypnosis. Mr. Incredible turns the ship using the rudder since Krushauer blocked access to the bridge with pipes, while Frozone attempts to help steer the ship using ice. Meanwhile, Elastigirl stops Evelyn from escaping and saves her from falling, even after Evelyn broke free from her grip. The ship reaches shore just as it is about to stop, but Frozone lays a thick layer of snow as a buffer against the nearby buildings to prevent any structural damage. The supers are thanked and the Supers Relocation Program is finally revoked, making supers legal once again.
At school, Tony Rydinger agrees with Violet to a date with her at the movies. He leaves for the theater with the Parrs, with Bob and Helen engaging in awkward small talk with Violet and Tony. However, at the theater the Parrs witness a car of bank-robbers armed with machine guns being chased by the police driving down the street. They leave Tony at the theater as Violet promises to be back in time for the movie. The Parrs don their masks, ready to pursue the criminals.
