In the deep jungles of Darkest Peru, British geographer Montgomery Clyde happens upon a previously unknown species of bear. He is about to shoot it to take back a specimen to the United Kingdom when a second bear playfully takes his gun away. He learns that this family of bears is intelligent and can learn English, and that they have a deep appetite for marmalade. He names them Lucy and Pastuzo. As he departs, he throws his hat to Pastuzo and tells the bears that they are always welcome should they wish to go to London.
Paddington Bear, having settled with the Brown family in Windsor Gardens, has become popular in his community, offering people emotional support in various ways. To purchase a unique pop-up book of London in Samuel Gruber's antique shop for his aunt Lucy's 100th birthday, Paddington performs several odd jobs and saves his wages, but the book is stolen. Paddington gives chase, but the culprit escapes, and Paddington is framed and arrested. Although Mr. Gruber and the Browns do not believe that Paddington stole the book, with no evidence that the thief even existed, Paddington is wrongfully convicted and jailed. The thief soon returns home and is revealed to be Phoenix Buchanan, an egotistical actor who lives opposite the Browns.