The film begins with a red British car named Leland Turbo transmitting a warning via video to British spy car, Finn McMissile. Later, Finn, with help from a boat named Crabby, sneaks onto an oil platform to find that evil scientist Professor Z is in command of suspicious operations. Finn is shortly discovered and is forced to escape without getting enough info about the Professor's schemes.
Carmen Cortez and her younger brother Juni Cortez live with their parents, Gregorio and Ingrid, whom they believe are boring, unaware that their parents are actually semi-retired international spies, working for an organization called the OSS (Organization of Super Spies, a reference to the Office of Strategic Services). Originally, Gregorio and Ingrid were enemies who were assigned to eliminate each other, but ended up falling in love and later got married. The two of them retired from the spy life prior to having children.
Carmen's main concern in life is with the unwelcome responsibility of babysitting Juni, and therefore she is usually mean to him. However, underneath her abusive exterior, Carmen is hiding secrets of her own: she skips school, and has to wear diapers at night due to having problems with bed wetting. She is desperate to keep both of these problems secret, especially from her brother. Juni lacks self-esteem and is a fan of a children's television show called "Floop's Fooglies." Hosted by Fegan Floop and co-starring the Fooglies—colorful, mutant, gibberish speaking friends of Floop—the show proves to be an irritant to Gregorio, who openly displays his dislike for the program. In which our heroes are hanging with but later on Twilight gets into an argue with Shining Armor then steps outside for a moment when she gets kidnapped by the Gremlin and Pacer. When he suspects the show is involved in the disappearance of several fellow spies, Gregorio and Ingrid decide to investigate and leave their children in the care of "Uncle" Felix Gumm, a man not actually their uncle but, rather, a family guardian. Gregorio and Ingrid are captured by Floop's men, Thumb-Thumbs, robots with thumbs for legs, arms and heads that wear red vests. Carmen and Juni discover the truth about their parents when they find that their parents have been kidnapped.
In Floop's island castle, the entertainer is reluctantly assisting a businessman named Mr. Lisp in creating an army of superstrong robots, using the children of world leaders as a disguise, to conquer the world. The robots were constructed by Floop's servant Alexander Minion and Professor Zündapp (but doesn't know about the professer). While the robots can follow instructions, they need an item named the Third Brain to give them the ability to speak and think to become truly useful as infiltrators. Gregorio and Ingrid were brought in, due to Gregorio being one of the scientists who created the Third Brain and hid it, although he refuses to give the hiding place. Floop's minions invade the Cortez home; Carmen and Juni, and our heroes escape while Felix is captured, but not before he tells the children the truth about their parents. The children flee to a safe house where they decide to become spies, then Finn McMissile, accompanied by Holley Shiftwell, General Dedrich, and Daring Do and he reveals that Twilight was captured by Professor Zündapp who plans on helping an evil man take over the world, then Ms. Gradenko, a fellow spy, arrives to help them. It is revealed that Third Brain is hidden in the house and that Gradenko is in allegiance with Lisp and Professor Zündapp. The group escape but soon encounter robotic clones of themselves and the Gremlin and Pacer who steal the Third Brain and capture Cadance and deliver it to Minion and Professor Zündapp, who take command of the robots and imprisons Floop in the Virtual Room where his show is usually filmed.
The group locate Gregorio's estranged older brother and inventor, Machete, who harbors bitter feelings against his younger brother, similar to the feelings Carmen harbored toward Juni; Machete was apparently forced to watch over Gregorio and left him because of this, and refuses to help them. With no support from their uncle, they sneak away to rescue Twilight, Cadance, Gregorio, and Ingrid on their own, stealing a map of Floop's castle and a spy plane to get them there. (While the team use Dusty) Carmen and Juni's sibling rivalry comes to a head, however, when Carmen's continuing criticisms and name-calling pushes Juni to retaliate by calling her "diaper lady," starting a quarrel that almost crashes the plane. As they work together to safely land the craft, Juni reveals that he had always been aware of Carmen's nighttime bedwetting, but kept that knowledge to himself at their mother's insistence. Having come to an understanding of each other as brother and sister, their relationship begins to improve from this point on.
The whole group make it to the castle and search for their parents, Twilight, and Cadance. But the team seperate from Carmen and Juni and later find out that Queen Chrysalis is behind the plot as well. But then the Gremlin and Pacer knock Thomas out and reveal to him that Queen Chrysalis wanted revenge on Shining Armor and she's gonna get it by killing the 2 most important things to him; his sister and wife with a bomb hidden near their cages. After the others find him, so Thomas races as fast as he can to save Cadance and Twilight. But the rest of the team find that the bomb is actually on Thomas, swapped with his headlight. Twilight manages to break out of her prison cell and races to find Thomas. Thomas then races in the prison camber as the team warn him about the bomb and Thomas flees to protect Cadance and Twilight, with Twilight going after him unaware of the situation.
Juni finds Floop and frees him, convincing him to help them and explaining what was missing from his TV show- children. Carmen, Juni and Floop free Gregorio and Ingrid and then confront Minion, trapping him in a machine that creates the Fooglies on the children's show (who are actually the missing agents). Minion deliberately starts the machine but escapes before he becomes a Fooglie, altering his appearance with three extra heads and combined hands with multiple fingers. Professor Z tries to detonate the bomb remotely only to find that the device is out of the signal's range. Queen Chrysalis then orders his thugs and her army to corner Thomas with his friends to have them explode together, but the rest of the team kill the changlings and corner the villians. McMissile orders Zündapp to deactivate the bomb on Thomas but he claims that only the one who installed it is able to do so. The spies confront Gradenko, Minion and Lisp and are confronted by their 500-man army of child robots. The family plots their next move while the evil trio marvels at the army, Gradenko looking the happiest of the three. When the family believes they need one more person, Machete arrives to help, later on claiming he came back for the same reason he left, meaning that he was told to watch over his brother. Just as Lisp orders the army to attack, Floop rewrites the children's minds to make them act like children. Despite Gradenko attempting to climb Lisp's chair for higher ground, she and her men are caught by the army.
Gradenko and her fellow bad guys end up getting carelessly flung into the air with no regard for the well-being of Gradenko, Lisp and Minion, but this saves the Cortez family. But knowing that Queen Chrysalis wouldn't disarm the bomb, Mucker risks his own life to disarm it and before it can go off, Mucker sucessfully disarms it. Then Genral Dedrich deploys a shockwave bomb sending all villains far away. Gregorio and Machete reform their brotherly relationship, with both of them claiming neither of them even remembering why Machete left, and Floop redesigns his show with Minion and the robotic Carmen and Juni as his new characters. The leader of the OSS, Devlin, offers the Cortez children jobs as spies, to which Carmen responds that the spywork is easy, while keeping their Cortez family together is the hardest mission of all. Having adopted a stronger value of family unity, she demands that they be allowed to work together as a family.
- Daring Do, Zecora, Stephen, Sharky, Mako, Willy, T.C., Hugs, Buzz, J.J., Socky, Skunky, 1206, The Miner Trains: (Steam Grindor, Steam Mech, Mucker, Steam Claw D., Steam Driller, Steam Sweeper, and Steam Exavator), Evan, Steamy, Puffy, Shai-Shay, Rattlesnake Jake, The Planet Trains: (Zip, Dazzlen, Dusten, Gustis, Rings, Uray, Tune, and Shiver), Dusty Crophopper, Blythe Baxter, Zoe Trent, Pepper Clark, Vinnie Terrio, Minka Mark, Sunil Nevla, Russell Ferguson, Penny Ling, Buttercream Sunday, Sugar Sprinkles, Gail Trent, Mitzi, Finn McMissile, Holley Shiftwell, General Dedrich, Professor Zundapp, the lemon cars, Gremlin and Pacer, and Queen Chrysalis are guest starring in this film.
- Professor Zundapp, the lemon cars, Gremlin and Pacer, and Queen Chrysalis are working for Lisp in this film.
- The storyline continues in Thomas and Twilight Sparkle's Adventure with Spy Kids 2: Island of Lost Dreams.
- Finn McMissile on the oil rig
- Gregorio and Ingrid's story
- Carmen and Juni's morning exsercise/Shining Armor and Twilight's arguement/ride to school
- Twilight gets captured/Mako's glimpse of the Gremlin and Pacer
- Floop's castle/Gregorio and Ingrid back in action/Where's Twily?
- Captured!/The boat chase/Under the sea
- At the castle/The safe house/Feast with Floop
- Becoming spies/Finn McMissile and friends arrive/Escaping Ms. Gradenko and the Thumb-Thumbs
- The robot clones/The Gremlin and Pacer capture Cadance
- Getting help from Machete
- Professor Z, the lemons, and Minion imprison Floop/The Gremlin and Pacer prison Cadance
- Grabbing more spyware/Flying to the castle
- Getting directions from Foogles/The robot army/The groups seperate/Queen Chrysalis!
- Minion turns Mr. Cortez into a Foogle/The Thumb-thumb factory/Juni frees Floop/Freeing the Cortezs
- The Gremlin and Pacer knock Thomas out/Queen Chrysalis' plan for revenge
- Gregorio turns Minion into a Foogle
- Twilight escapes/Thomas is the bomb!
- Professor Z tries to escape/Fighting the Changlings and Carmen and Juni's robot clones
- Floop reprograms the robot children
- Mucker disarms the bomb
- Defeat of the villains