At the beginning of the film, Our Heroes & The Turtles have been forced to live with their friend the news reporter And Ash's Aunt April O'Neil because the Foot Clan & The Joker & Harley Quinn know the whereabouts of their lair in the sewers. While the Turtles are looking for a new home, they encounter a pizza delivery boy named Keno, who is trying to fight off a band of robbers by means of his skill as a martial artist, whereupon the Turtles intervene on his behalf. Viewers later see that the Foot Clan, no longer as large as it was in the first film, have retreated to a large junkyard, where Master Tatsu, Shredder's second in command, attempts to take control of the gang, but is challenged by Shredder himself. Shredder was thought to be dead, as a result of falling from a rooftop into a garbage truck's trash compactor after a short battle with Splinter at the end of the first film. He now appears physically deformed and obsessed with obtaining revenge, to achieve which he sends a Foot member to pose as an intern at the news network and trail April.
April is shown making a report on the efforts of an industrial organization known as Techno Global Research Industries (TGRI for short) to neutralize pollutants that have resulted from their experiments. Soon after her interview of him, chief scientist Professor Jordan Perry discovers that toxic waste produced by the company has caused mutation in nearby dandelion plants, producing exponential growth. The Foot member posing as an intern informs Shredder of this, whereupon Shredder proceeds to dispatch the Foot Clan to obtain some of the waste. Splinter, seeing the report on television, shows the Turtles and April the canister of "ooze" that had caused himself and the Turtles to mutate into their present forms, revealing that it was made by the TGRI and evidently contained the same substance that triggered the overgrowth of the aforementioned dandelions. The Turtles infiltrate the TGRI offices to seize a sample of the ooze, only to encounter Tatsu and the Foot. Despite the Turtles' efforts to stop them, Tatsu and the Foot escape, taking the last canister of ooze and Professor Jordan Perry with them. Shredder later instructs Perry to use the ooze to transform a snapping turtle and a wolf into monsters, creating the characters Tokka and Rahzar. Perry does this, but because Perry altered the ooze before giving it to Shredder, it does not increase the intelligence of the mutants, making them infantile in intellect. As a result, when Shredder tells them to call him "Master", they misinterpret this and call him "Mama" instead, enraging him. He then orders Tatsu to kill them; however, when he sees a demonstration of their immense strength, he decides to use them as weapons. He releases them into city streets, where they amuse themselves by causing damage and wreaking havoc.
Raphael goes alone to pursue the Foot while the other three Turtles find a new lair in an abandoned subway station. With the assistance of Keno, the Foot headquarters located on Lairdman Island (home to the origin of the Ooze) off the coast of New York City is infiltrated, but Raphael is eventually captured by Shredder. Keno is able to inform the others, who go to save Raphael. After rescuing Raphael and Professor Perry, being themselves aided by Splinter, the Turtles are vanquished in battle by Tokka and Rahzar. Later, Professor Perry explains that the ooze was created as the result of discarded chemicals accidentally combining after being exposed to radiation in a lab accident, sending Donatello into a brief funk before Splinter assures him that he cannot judge his life on how it began, but only on what it is. Learning that Shredder intends to release Tokka and Rahzar into populated areas unless the Turtles confront them, Professor Perry and the Turtles attempt to develop an antidote to the ooze's effects. After creating a successful formula, they trick their enemies into ingesting it by hiding it in doughnuts and appealing to Tokka and Rahzar's hunger. Tokka and Rahzar eat some, but soon discover the antidote and become enraged.
The Turtles find themselves confronting the Shredder's mutants at a nightclub, in full view of every guest and performer. To appease the initial panic, the club's singer Vanilla Ice improvises a rap song whose refrain is "Go Ninja, Go Ninja, Go!", which is then sung as background music to the fights taking place in the club. Acting on Perry's advice, the Turtles use fire extinguishers to stimulate a swift activation of the antidote by spraying carbon dioxide into their enemies' throats, accelerating the anti-mutagenic process. The mutation is reversed, reverting the two monsters back to their natural forms. The Shredder then arrives at the club with the ooze canister and menaces all who are present. To defeat him, the Turtles use a sound amplifier to magnify a single noise produced by a musical instrument, resulting in a powerful sound-wave that throws the Shredder out of the club and into the area among the docks below. As for the ooze canister, Perry manages to obtain it and takes it away to safety.
In the docks below, despite having lost the canister to Perry, Shredder uses a vial of ooze to become a superior form of himself, extemporaneously called Super-Shredder. While fighting underneath a pier, the Super-Shredder, desperate to destroy the Turtles and heedless of all else- his simple speech pattern of various grunts suggests that his intellect has been reduced as well-, wrecks the structure, bringing it down on himself. The Turtles escape by utilizing their amphibious nature. Then, they note Shredder's hand emerges from the wreckage, but moments later falls down, indicating that he has died from the overdose of the ooze.
The Turtles return to their new lair, where Splinter asks whether they were seen. They deny it (insisting that they practice "the art of invisibility"), until Splinter displays a newspaper having a front-page picture of them, taken at the nightclub where they fought Tokka and Rahzar. Splinter advises them to practice harder, then orders them to perform ten flips each, reminding them with the line "Go Ninja, Go Ninja, Go!". The screen freezes as they begin the first flip, whereupon Splinter is heard shouting "I made another funny!" At that point, he laughs, referring back to the original Teenage Mutant Ninja Turtles film where he made the comment that he made a funny at the end of that movie as well.