Usagi and friends return to Agrabah and unites with Aladdin, Jasmine and friends. But faces Jafar once again.
A clan of bandits, led by the incompetent Abis Mal, return to their hideout, only to have the brunt of their loot stolen by Aladdin and Abu along with Sailor Moon and her team. Aladdin distributes the treasure amongst the poor of Agrabah - with the exception of a jewel flower, which Aladdin gives to Jasmine.
Meanwhile, in the desert, Iago manages to dig himself and Jafar's genie lamp out of the sand, where they were exiled by the Genie. Jafar orders Iago to release him, but Iago rebels against Jafar and throws the lamp into a nearby well. He returns to Agrabah, hoping to gain favor with Aladdin, in order to return to the palace. When he encounters Aladdin, his claim of being a slave underhypnosis does not fare well and is pursued. Aladdin runs into Abis Mal and his bandits, but is inadvertently rescued by Iago. Aladdin returns to the palace and jails Iago, promising to allow a fair trial. He,Jasmine and he team are greeted by the Genie, who has returned from seeing the world and is content with staying with his friends.
At a special dinner held in Aladdin's honor, the Sultan announces that he wants to make Aladdin his new grand vizier. Trying to draw on the good mood, Aladdin attempts to persuade the Sultan to forgive Iago, but Iago inadvertently ruins the dinner when Rajah chases him into the room. The Sultan and Jasmine are furious at Aladdin, and Jasmine leaves the room heartbroken that Aladdin did not trust even her about this. With Iago's help, though, Jasmine eventually reconciles with Aladdin.
While Abis Mal is washing himself at a well, he finds Jafar's lamp and when it is rubbed, Jafar appears as an abominable genie. Although bound by the laws of obedience, Jafar manipulates his master into wasting his first two wishes, but forms an alliance to the end of exacting revenge upon Aladdin and Sailor moon. The pair travel to Agrabah, where Jafar reveals himself to Iago and coerces him into complying with his schemes. The next day, Aladdin and the Sultan depart to have a discussion about Iago's fate, while Jafar confronts the Genie, Abu and the Sailor Scouts in the Palace gardens and imprisons them.
When Aladdin makes good progress with his discussions with the sultan, he is ambushed by Abis Mal, who is supported by Jafar's sorcery. The Sultan is kidnapped and Aladdin thrown into the raging river. Jafar frames Aladdin for the alleged murder of the sultan by leaving fake evidence and disguises himself as Jasmine to implicate Aladdin. Aladdin is thrown into the dungeon, to be executed by beheading come morning.
In the dungeon, Iago chooses to side with Aladdin's friends by releasing the Genie to save Aladdin. Once everyone is freed, Aladdin, Sailor Moon and the team decides to destroy Jafar, which could only occur by destroying his lamp. Jafar and Abis Mal celebrate Aladdin's death, but Jafar demands to be set free. Abis Mal, however, hesitates, and even after Jafar bribes him with mountains of treasure, he still refuses to set Jafar free, afraid that Jafar's rewards will vanish and aware that Jafar cannot harm him. Aladdin attempts to steal the lamp, but is discovered and he and Abis Mal are both blown out of the throne room and into the palace garden by Jafar. Aladdin, Jasmine, the Genie, Abu, Carpet and the team engage Jafar in combat, but even when bound by the rules of the Genie, he easily outmatches them, using his tremendous powers to stop them from obtaining the lamp. His indiscriminate use of power opens a fissure in the ground which is filled withmagma. Thoroughly trapped, Aladdin, Jasmine, the Genie, and Abu face certain death when suddenly Iago reappears and grabs the lamp. Jafar blasts him, leaving him for dead, but Iago manages to recover and uses his last ounce of strength to kick the lamp into the magma before apparently dying. The lamp melts and submerges, and Sailor Moon uses the Silver Crystak to destroy Jafar once and for all. Aladdin barely manages to rescue Iago's body and escape the fissure as Jafar's power vanishes and everything is restored to normal. As Aladdin and the others mourn him, Iago is revealed to have survived, but barely, since genies cannot kill.
Iago is welcomed to the palace as a trusted friend and slowly recovers from his wounds. Aladdin announces to the Sultan that he is not yet ready to become a grand vizier, because he first wants to see the world. Jasmine declares that she will join him, but Iago objects to this and continues to rant as the film ends.