Sora, Donald, Goofy, Leonardo, Donatello, Raphael, Michelangelo and Courage (along with Winnie The Pooh, Tigger, Piglet, Rabbit and Eeyore) have traveled to the Aztec Palace to meet Emperor Kuzco, who got into the groove, but transformed into a llama by his former adviser named Yzma (whom Rahzar, Fishface and Tiger Claw work for), to get rid of Kuzco. They soon meet a peasant named Pacha who can help take Kuzco back to the palace.
Kuzco (David Spade) is the 18-year-old self-centered teenaged emperor of the Incan empire brought up by his head advisor Yzma. One day, he summons Pacha (John Goodman), the headman of a nearby village, to inform him that he is planning to build his enormous summer home, Kuzcotopia, on the site of Pacha's house for his birthday, thus rendering Pacha and his family homeless via eminent domain. Pacha attempts to protest, but is dismissed. He recently callously fires his ancient, power-hungry advisor Yzma (Eartha Kitt) for attempting to run the kingdom while he is preoccupied, infuriating her, furious at what has happened to her, She, along with her easily-distracted dim-witted right-hand man Kronk (Patrick Warburton) then attempt to poison Kuzco so that she can take full and permanent control of the empire. Yzma invites Kuzco to a "farewell" dinner and he drinks the poison, which supposedly kills him. However, he is still alive and suddenly, his ears become those of a llama. Soon, his neck stretches, his hands turn into hooves, and his face turns into a snout. Yzma orders Kronk to knock the transformed Kuzco unconscious and discovers that the supposed "poison" was actually a potion that turned him into a llama.
Yzma orders Kronk to send Kuzco to his death via a waterfall drop out of the palace, but conscience-stricken Kronk loses the sack holding Kuzco. Kuzco ends up in Pacha's village (he later stops the show to remind the audience that this is his story, not Pacha's), accuses Pacha of kidnapping him and demands that Pacha help him return to the palace. Pacha refuses unless Kuzco builds his summer home elsewhere, and Kuzco attempts to find his own way home in the scary-looking jungle, He accidentally gets surrounded by a pack of black jaguars, only to be saved by Pacha until they get tied to a huge log by a vine and float out of control down a river and go over a waterfall. Kuzco then falls unconscious again and Pacha gets him up by nearly giving him mouth-to-mouth resuscitation. They then camp there for the night. And in the night, when Kuzco himself is sleeping, Pacha realizes that he is trembling in cold, and paternally covers him with his poncho and Lambie has decided to sleep with Kuzco to keep him company and keep him warm. Kuzco silently realizes all these things while Pacha returns to the campfire, before she went back to sleep, he starts to feel guilty. Meanwhile, Yzma assumes command of the nation, but when Kronk reluctantly reveals he never killed Kuzco, the two head out and begin to search the local villages for him.
Kuzco feigns agreement with Pacha's demand, and Pacha leads him back toward the palace. On their way across a bridge Pacha falls through a weak plank. Kuzco refuses to help him as he says that he was going to put Pacha in prison for life but this was better, and Kuzco admits that he lied, Pacha yells at Kuzco saying that they shook hands on it. Kuzco replies that you need hands to do that and that he has no hands. Kuzco then falls through a plank like Pacha and him and Pacha start fighting. The bridge shortly snaps and falls. Kuzco and Pacha fall down the cliff and end up stuck at the bottom and are forced to work together to escape falling in the river and being eaten by crocodiles at the bottom. Working together, they climb up the cliff to reach the rope to pull themselves up the cliff. While climbing, Pacha grabs the rope, but it's stuck in a branch which scorpions then fall off onto Kuzco and Kuzco gets scared and falls. Pacha then grabs Kuzco and Kuzcos face gets stuck in a hole. The scorpions then climb up onto Pacha's back. Pacha gets scared and smacks his back onto the wall. This wakes up some bats in the wall with Kuzco they then attack Kuzco and launch him off. Kuzco scared runs up the wall with Pacha and the land back on the cliff. After laughing about it, the cliff side Pacha is on begins to fall, and Kuzco saves him by grabbing onto Pacha's poncho and launching him back. Pacha finds out that Kuzco is starting to change his ways no matter how much Kuzco denies it. Pacha then says they should start going as it's a 4-day walk to the palace with no bridge. Kuzco then questions Pacha about this and Pacha says that he shook hands on it and he will still take Kuzco. Meanwhile Yzma and Kronk are in the jungle looking for Kuzco, and after getting chased by bees, Yzma meets Bucky and screams at him. Buck gets scared and runs to Kronk and they start talking. Yzma is mad only until Kronk translates that Bucky said a talking llama gave him trouble. After asking him for Yzma, Kronk finds out where Kuzco went, and he and Yzma head off. Meanwhile, Kuzco and Pacha are walking until they found a roadside diner, and decide to eat there with Kuzco dressed as a girl since Llamas are not allowed in. After Kuzco goes to talk to the chef about the food Pacha begins to eat until Yzma and Kronk arrive shortly after and he overhears Yzma discussing their plans to kill Kuzco, Pacha goes to Kuzco and attempts to warn him throughout the commotion in the diner, but Kuzco doesn't believe him. Kuzco, convinced Yzma is loyal, calls Pacha selfish and tells them to go,and returns to Yzma, only to overhear Yzma and Kronk discussing that they are seeking to kill him, and that the kingdom doesn't miss him. Kuzco realizes Pacha was right, but to his shame, Pacha has already left. Later that night, at Yzma and Kronk's camp spot, Kronk then suddenly realizes that Pacha is the guy who had Kuzco in his cart, and tells Yzma that if they find him at his village, they'll find Kuzco. After a repentant Kuzco spends the night alone in the jungle (where the movie started earlier), to his surprise he finds Pacha in a llama field; the two reunite, with Pacha having forgiven Kuzco. After becoming friends again Kuzco and Pacha race back to Pacha's house to get some supplies while going up two old man tell Pacha his realitives came by it turns out to be Yzma and Kronk Pacha warns his wife in private. Pacha's wife and kids then launch Yzma down the hill and ends up looking like a pinata Yzma then sees Kuzco and Pacha running off. She then tells Kronk, and shortly, he and Yzma race back to the palace after Kuzco and Pacha. Yzma and Kronk chase them until the pursuers get hit by lightning and fall into a chasm.
Kuzco and Pacha arrive at Yzma's laboratory only to find that their pursuers somehow got there first (by a method which, humorously, not even they know). Yzma passes Kronk a knife to finish the duo off. Kronk becomes stricken with doubt as his angel and devil appear on his shoulders and converses with them, to the confusion of everyone else. Kronk changes sides after a vicious tongue-lashing from Yzma (who insults his cooking), and attempted to drop a chandelier on her, but her thin body enables her to escape harm. In retaliation, she drops him down a trap door. Yzma summons the palace guards, forcing Kuzco and Pacha to grab all of the transformation potions they can and flee. After trying several formulas that convert Kuzco to other animals, and then back to a llama, they escape the guards (but not Yzma) who foolishly try to follow them down a drain, and find they are down to only two vials. Yzma catches up to them and accidentally steps on one of the two, turning herself into a tiny kitten and speaks in a high-pitched voice. She still almost manages to obtain the antidote after fighting Kuzco and Pacha for it, but is thwarted by the sudden reappearance of Kronk, who questions why the trapdoor led him outside.
Kuzco becomes human again and sets out to redeem himself, building a much smaller summer cabin on the hill next to Pacha's home. Meanwhile, outdoorsman Kronk becomes a scout leader, with kitten-Yzma forced to be a member of the troop. Kronk then says, "I'm so proud of you guys." as the movie ends.