British spy Finn McMissile infiltrates the world's largest untapped oil reserves, owned by a group of "lemon" cars. After being discovered, he is forced to flee and fake his death.
Four-time Piston Cup champion Lightning McQueen returns home to Radiator Springs and reunites with his best friendMater and his girlfriend Sally Carrera. Former oil tycoon Sir Miles Axlerod, now a green power advocate, announces a racing series called the "World Grand Prix" to promote his biofuel Allinol. When Italian formula race car Francesco Bernoulli challenges McQueen, he and Mater—along with Luigi, Guido, Fillmore, and Sarge—depart for Tokyo, Japanfor the World Grand Prix.
Meanwhile, the lemons, who are led by unknown mastermind Professor Z (or Zündapp), secretly plot to secure their oil profits by using a EMP weapon disguised as a television camera to ignite the Allinol fuel. McMissile and his partnerHolley Shiftwell attempt to rendezvous with American spy car Rod "Torque" Redline at a World Grand Prix promotional event in Tokyo, to receive information about the mastermind. However, Redline is then attacked by Zündapp's henchmen and passes his information to Mater before he is captured. Holley and Finn mistake Mater as their American contact. Zündapp tortures Redline and reveals that Allinol can ignite if impacted by a high electromagnetic pulse. Zündapp demonstrates it on Redline, killing him, but not before they realize that he passed this information to Mater.
During the first race, Finn and Holley help Mater evade Zündapp's henchmen. In the process, Mater inadvertently gives McQueen bad racing advice, which causes him to lose the race towards Bernoulli. Meanwhile, Zündapp uses the weapon on several race cars. After McQueen falls out with Mater, Finn (who still thinks the tow truck is an real American spy) drafts him into foiling Zündapp's plot. Finn and Mater escape Zündapp's henchmen and climb aboardSiddeley. Finn and Holley remove the tracking device on Mater and discover in it a picture of a mysterious British engine, which Mater identified by the engine and some rare parts.
Finn, Holley, and Mater all fly to Paris, France, where they go into a black-market and meet an old friend of Finn's,Tomber. Finn and Holley show the mysterious engine to Tomber, who tells them that the car with the engine was his best customer, but he has never met him in person. Mater explains what he knows about the evil Lemons, and realizes that every Lemon involved with the plot is one of "history's biggest loser cars." Tomber tells Finn, Holley, and Mater that the lemons are going to have a secret meeting in Porto Corsa, Italy, where the next race in the World Grand Prix would be held.
In Italy, Mater infiltrates the criminals' meeting and discovers Zündapp's plan. Zündapp's henchmen, meanwhile, use their weapon on several more cars during the race, eventually causing a multi-car pileup on the Casino Bridge. With the Allinol fuel under suspicion, Axlerod suspends its use for the final race in England. However, McQueen chooses to continue using it. The criminals then decide to kill McQueen in the next race and upon hearing this, Mater is exposed and is captured, along with Finn and Holley, and tied up inside Big Bentley's bell tower in London, England.
Mater realizes how foolishly he has been acting. The criminals use the weapon on McQueen during the race, but nothing actually happens. Mater escapes to warn his friends of a bomb planted in McQueen's pit, but Finn and Holley find out that the bomb is actually planted Mater's air-filter. They warn him about the bomb, but he flees to protect his friends. However, he is pursued by McQueen in an attempt to reconcile, unaware of the danger until they are beyond the range of Zündapp's remote detonator. He sends his henchmen to kill McQueen and Mater, but they are foiled by the combined efforts of Finn, Holley, and the Radiator Springs residents. Upon his capture, Zündapp reveals that only the person who installed the bomb can deactivate it, and Mater realizes that Axlerod is the mastermind behind the plot. Mater confronts Axlerod, trapping him next to the bomb. Axlerod finally deactivates the bomb and he, Zündapp, and the lemons are all arrested by the police.
As a reward for his heroism, Mater receives an honorary knighthood from the Queen and returns home with his friends, where the cars from the World Grand Prix take part in the unofficial Radiator Springs race. Fillmore reveals that before the last race, Sarge replaced McQueen's Allinol with Fillmore's organic fuel (which prevented McQueen from being affected by the weapon). McMissile and Shiftwell invite Mater to join them in another spy mission, but he graciously turns it down but asks Shiftwell for a date when she returns which she accepts. He gets to keep the rockets they gave him earlier, which he now uses in the Radiator Springs race.