Doctor Jumba Jookiba, a mad scientist, is on trial by the Galactic Federation for illegal genetic experimentation, evidenced by his creation "Experiment 626", a small blue sentient creature with unparalleled intelligence and strength, but also a propensity to cause chaos. Jumba is imprisoned while the creature is sentenced to exile on a desert asteroid. "626" manages to escape on a red police spaceship, and activates the hyperdrive, causing its guidance systems to malfunction and randomly set a course for Earth. 626 crash-lands on Kauai only to be knocked unconscious by three passing trucks and taken to an animal shelter. The Grand Councilwoman dispatches Jumba and Agent Pleakley, the Council's expert on Earth, to the planet to have 626 captured discreetly, because Earth is the habitat for the "endangered" mosquito and humans are described as being unable to handle an alien encounter.
The film starts out with ex-Captain Gantu on his new spaceship (his original got destroyed in the first film), being hired by a hamster-like alien named Dr. Jacques von Hämsterviel to retrieve the other 625 experiments.
Stitch (Disney) is having a nightmare about turning bad again and causing destruction to Earth, including hurting List of Lilo & Stitch characters#Lilo Pelekai. After Stitch is woken up by Lilo, she comforts him by telling him she knows he would never cause harm to her. Lilo also tests his goodness level by having him do a few good deeds. Discovering that they are late for hula class, they use their hovercraft to get there.
With their mission to capture all 624 experiments and repurpose them on Earth completed, Lilo, Stitch, Jumba and Pleakley are honored as heroes by the Galactic Alliance. Jumba is given the confiscated key to his laboratory again, Pleakley is offered a post as chairman of Earth Studies at G.A.C.C. (Galactic Alliance community college), and Stitch is made the Captain of the Galactic Armada and commander of his newly commissioned ship BRB-9000 (Big Red Battleship 9000). Lilo is made Galactic Federation Ambassador to Earth and sole guardian of Stitch's "cousins". Before they leave, Lilo gives Jumba her favorite Elvis record, Pleakley a paperweight (which is actually an Earth rock) and Stitch a necklace with a Kū tiki (the Hawaiian mythology of strength).