The film centers around Simba's daughter, Kiara, who falls in love with Kovu, a male lion who was raised in a pride of Scar's followers, who are Simba's enemies. Desperate to be together, they must overcome the two obstacles that are keeping them apart: Simba and Kovu's mother, Zira.

This film was not rated until the two-disc Special Edition was released. It was then given a G rating by the MPAA.The film starts with the presentation of Simba and Nala's new cub Kiara. When Kiara is older, she runs from her suffocating babysitters Timon and Pumbaa and sneaks across the borders of her father's kingdom to the 'Outlands', where she encounters an "outsider" cub named Kovu. Kovu tells her that Outsiders don't take orders, nor need anyone to take care of them, which impresses her greatly. However, the two soon get into trouble when they find themselves in a river surrounded by crocodiles. Luckily, Kovu "bravely" distracts them long enough for the two to escape. The cubs become friends, and Kiara attempts to initiate a game of tag, only to find Kovu has no idea how to play. In a bid to relax him, she playfully growls, but when Kovu retaliates, out of nowhere Simba appears. Kovu's mother Zira, who had been watching from the bushes, also emerges.

The two face off as Simba's pride appears, and Zira reveals that the Outsiders were exiled by Simba for remaining loyal to Scar, and that Kovu was Scar's heir to the throne ?C and therefore a threat to Simba. However, Simba is unwilling to hurt a cub and orders the duo to leave, much to Kiara and Kovu's dismay. As they journey home, Simba scolds his daughter for breaking the rules and endangering herself, reminding her that one day she will be a queen. Kiara expresses her disinterest in the plan, but Simba says that it is a part of her, as she is a part of him. The two sing "We Are One", but Kiara still does not understand the meaning of the phrase, though Simba says she will, in time.

Meanwhile in the Outlands, Zira's ragged and termite infested adult cub Nuka complains to his younger sister Vitani about Kovu being "The Chosen One", when as the eldest the honor should be his. At that moment, Zira returns and scolds her two sons. She mocks Kovu's claim that he and Kiara are friends. She then realizes that, by using Kiara, Kovu can get close enough to Simba to murder him and take the throne. Thus, he can avenge Scar's death. She lulls Kovu to sleep by singing him 'Zira's Lullaby', expressing her desire for revenge. Alone in his tree, Rafiki communicates with Mufasa's spirit, and voices his fear of Zira and mistrust of Kovu, brought up with hate in his heart. Mufasa however, has his own plan ?C Kovu and Kiara will be together, and unite the two prides.