It has been a year since Cinderella married the Prince. Both of them head to the forest to attend their wedding anniversary that the mice and Fairy Godmother have prepared for them. Meanwhile, Anastasia and Drizella, who are currently taking over Cinderella's jobs at the household, are not having a good time. Anastasia manages to follow Cinderella and the prince to where the anniversary is being held. Figuring out that it was magic that gave Cinderella her "happily ever after", she swipes the Fairy Godmother's wand when she drops it. Anastasia returns home quickly and shows it to Lady Tremaine and her sister, both thinking it's just a stick and she has lost her mind.
The Fairy Godmother shows up and attempts to get the wand back from Anastasia, who accidentally turns her into a statue. Impressed, Lady Tremaine takes the wand and reverses time to undo Cinderella's happily ever after by going back to the events at the end of the first movie, in a bid to once again make Cinderella's life a misery. She makes what was originally a tiny shoe fit Anastasia's big foot with Cinderella being locked in her tower, only to be freed to see Anastasia and Drizella leaving. While speaking with Cinderella as she's about to give her the replacement glass slipper she pulls out, Lady Tremaine snatches it with her staff and shatters it. Furious, Lady Tremaine confronts Cinderella and does not allow her to approach the Prince or the palace, but allows her to clean up this mess. When Lady Tremaine leaves, this leads Jaq and Gus to appear and for Cinderella to sing "More Than a Dream". Gus and Jaq try cheering her up, Jaq saying that "Princey knows he danced with Cinderelley last night!" and gives Cinderella the idea to go after the prince and convince him that they danced together.
Skipping back to the step family, they've arrived at the castle, where the prince is speaking while sword fighting with his father. They go into discussion about how the king was immediately smitten by his Queen, the Prince's mother, who had passed on years before. With Anastasia arriving, the prince is, at first, glad as he thinks it's the girl he danced with (Cinderella), but slightly disappointed when seeing Anastasia. He tells her that she and her family will get an escort home, but Lady Tremaine uses the wand to make him forget who he really danced with and marry Anastasia that night. The Prince falls under the spell and, believing he danced with Anastasia, gives her the ring to marry them. Anastasia goes hyper and agrees to the marriage.
Meanwhile, Gus and Jaq had witnessed this event from a lamp high above the scene since they got inside with Cinderella, who was claiming to be the royal mouse catcher to stay inside. Gus and Jaq play along and, when viewing this scene, they rush off to tell Cinderella. Later on, Cinderella is seen confronting the Prince and both are confused, the prince thinking he danced with Anastasia yet Cinderella knows the truth. She is cut short from saying what really happened and forced to go find the mice (Jaq and Gus) that have come into the castle. Cinderella is placed in the cellar where Gus and Jaq tell her what Lady Tremaine had done to the prince, Cinderella now set on getting the wand back.
Anastasia and the Prince have a moment where they dance and Anastasia is repeatedly stepping on his foot by accident. When the waltz is over, the King summons her into another room, while the Duke takes the Prince out and tells her about his wife. He gave her the Queen's most treasured possession, which is a seashell. Both the King and Queen were walking one day on a beach, unknowing of one another, and reached for said seashell at the same time. Their hands met and they fell in love. He allows Anastasia to keep the shell, who is smitten with it instantly. The Prince tells the Duke that he felt nothing when his hand connected with Anastasia's, and is once again confused. Jaq and Gus get into the room where the step family is staying and Lucifer's tail manages to get caught on fire, prompting the famous line "Someone put out the cat!" coming into play. Anastasia throws a pillow against him and whams him right into the wall, the stepmother demanding that someone would call for the housekeeper. Cinderella gets into the room in disguise with a castle maid bonnet covering her eyes and hair.
Lady Tremaine pulls the bonnet off to reveal Cinderella. Jaq and Gus get the wand, and the three make a run for it down the halls while being chased by guards. With Jaq and Gus using the magic from the wand, they transform Lucifer into a jack in the box first, then a mini-sized Lucifer, then back to normal when he's in the mouse hole. Cinderella makes it to a staircase where the Prince appears, Cinderella trying to break the spell on him so he would remember who he really danced with. This is cut off when the guards get to her and Lady Tremaine takes back the wand. Cinderella manages to grace her hand over the Prince's, which has him shocked and now baffled. Lady Tremaine orders for Cinderella to be on the next ship on exile from the kingdom.
Late afternoon, the Prince is seen talking to his father, but motions into a small fitting room perhaps. He speaks with Jaq and Gus, who perform the song "At the Ball" explaining that he danced with Cinderella and that he was under a spell. This causes him to hurry out the room and to the stairs where he confronts his father, who forbids him from stepping down the stairs. The Prince agrees, only to jump out the window and climb down the vines, then gets on his horse and demands one of the guards to tell him where Cinderella is. He rushes off to her rescue so she isn't sent away for good, the King allowing this to happen when he sees it. The Prince and his trusty steed race after the boat, where they end up running through a lighthouse and the horse gets scared of heights. The Prince is seen flying onto the boat and using a small blade against the sail to soften his fall. He sees Cinderella and places his hand against hers and knows it was her who he danced with.
They return to the castle, and the King orders for Lady Tremaine, Anastasia, and Drizella to be brought into custody. They vanish, and the Prince says that it is Cinderella who he wants to marry. When Cinderella is in front of a mirror and getting ready for the wedding, Lady Tremaine appears from a closet behind Cinderella with Anastasia now looking identical to Cinderella's appearance. Lady Tremaine then makes Cinderella vanish into a pumpkin carriage, this one being an evil version along with a human version of Lucifer as the driver. The intent is to have her killed. With the help of Jaq and Gus, the three conquer over the pumpkin carriage and Lucifer, and ride back on the horse that was used.
Cinderella makes it back to the wedding just in time to witness, to her amazement, Anastasia (still using Cinderella's appearance) saying "I don't", and declaring she only wants to be loved for herself, having realized that she doesn't truly love the Prince. Furious, Lady Tremaine and Drizella reveal themselves. The king orders his guards to seize Lady Tremaine. In a fit of lust and with no fear, Lady Tremaine immediately uses the wand and turns them all into various animals as they all lunge for her, so they can't get to her, while Drizella tells her to turn Anastasia into a toad. Determined to defend Anastasia for her honesty, Cinderella confronts Lady Tremaine and forbids her to use magic on either of them. When an unfazed Lady Tremaine attempts to turn both Cinderella and Anastasia into toads, the Prince steps in and uses his sword to reflect the spell against the two, causing both Lady Tremaine and Drizella to disappear and then reappear in the cellar as toads.
Anastasia reunites Cinderella with the Prince and picks up the wand and returns herself to her normal appearance, then gives the wand to Cinderella and attempts to give the seashell back to the king, who lets her keep it by saying "Everybody deserves true love." Cinderella forgives Anastasia, and the two reconcile, putting their animosity firmly behind them. Both Cinderella and Anastasia then bring back the Fairy Godmother from her stone state, who offers to undo Lady Tremaine's change of events, but the offer goes unheard of, as Cinderella and the Prince get married on that day. The ending credits show several paintings depicting the main cast before showing both Drizella and Lady Tremaine being restored to their human forms, but must now work for Cinderella, wearing the exact same clothes they forced her to wear, much to their horror.