Around a decade after the events of the previous film, Adam Szalinski, now a preteen, just wants to be a normal boy and go to baseball camp, but his interest in sports seem almost alien to his parents Wayne and Diane, as Amy and Nick, who are currently living away from home, were both a genius and a thespian respectively. Wayne has also started his own lab "Szalinski Labs" with his brother Gordon, and the two receive tickets to witness a shuttle landing, but Diane interrupts Wayne's message, reminding him that he needs to watch Adam and his cousins, Jenny and Mitch, while she and Gordon's wife Patti leave town for a Neil Diamond concert. She also reminds him to get rid of a tiki-man statue that she sees as an eyesore, though Wayne considers it his good luck charm (not to mention something that could earn him a fortune one day).
After the women leave, Wayne and Gordon have activities planned that bore the children. Wayne sends them to the store, but reveals to Gordon that it is a ruse to get rid of them long enough so that he can use his shrink ray in order to shrink the tiki-man down without Diane's knowledge, and without the risk of unintentionally shrinking the kids. However, by an act of carelessly not turning the machine back off first thing after they succeed, Wayne and Gordon are both shrunk when a pool ball on the machine falls out of place and falls onto the button while they are in front of it searching out the tiki. Meanwhile, Patti realizes she forgot to give Gordon Mitch's pills for his potassium deficiency and they head back. Hoping to catch their husbands by surprise, they sneak up to the attic, and are shrunk when another pool ball falls onto the machine's button. Shortly after, the kids return home and; after hearing Wayne's message about the launch, assume they are alone for the evening, and Jenny makes plans to have some friends come over. Upstairs, the adults make use of a fishing rod and line to lower themselves down into Adam's room. To attempt to get to the floor, they use a Matchbox race track, but they overshoot their target and fall down the laundry chute ending up in a clean load that is then delivered back upstairs by Adam and Mitch. The four adults tumble out of the laundry basket when it is overturned, and discover Adam and Mitch reading a Sports Illustrated magazine, revealing to Wayne his son's interest is not in science as he hoped.
Seeing Mitch struggling, Patti realizes that they need to get him his medicine soon, or he could die. Mitch ignores his weaknesses, though, and goes downstairs. The parents witness the arrival of Jenny's friends and decide to use a bubble blower one of them brought in order to get downstairs. The women land safely, but Wayne and Gordon fall into a bowl of dip and are nearly devoured by the ravenous girls.
In the kitchen, when Patti and Diane resolve to find some way up the counter in order to find Mitch's pills and push them into view, they encounter a daddy long-legs with its legs caught in a spider web, and Diane quietly talks to him as Patti tries to cut the webbing. Diane realizes her own insecurities about being small as she relates to the bug, whom she had earlier tried to kill, and realizes how hard it is to be that size. After he is freed, Patti and Diane realize they can cling to the spider's silk as it climbs up and onto the counter. Meanwhile, Gordon and Wayne decide to rewire the stereo to work as a microphone, and a group of boys crash the party, including Ricky King, Jenny's crush. He takes Jenny into the kitchen, where he steals a kiss from her, but she spurns him for not asking permission first, thus earning Patti's respect. Angered, he returns to his friends and they begin to wreak havoc in the living room. Mitch, severely weakened enters the kitchen and discovers Patti and Diane on the counter before fainting, partially from his failure to take medicine for his potassium deficiency, and partially from the shock of seeing his miniature mom and aunt. Adam and Jenny discover him, and thinking quickly, Adam feeds Mitch potassium-rich bananas, and he begins to recover, weakly saying he had seen his mother. In the living room, Wayne rewires the stereo so that Gordon can talk and amplify his voice so he can pretend to be the voice of God. He orders the children to leave the house, leading Adam, Mitch and Jenny to realize what had happened to them.
In the attic, the kids discuss the benefits of leaving their parents shrunk briefly before deciding they love them more than that. They return them to their normal sizes. Patti confides her trust in Jenny for how she stood up to Ricky, while Wayne tells Adam that he can have an interest in sports, and agrees to sign him up for baseball camp. Diane tells Wayne he can keep his tiki-man, and won't sweat the "small" stuff anymore, while Wayne decides to relinquish his presidency of Szalinski Labs to the more personable Gordon, while he decides to return to inventing. In the end, life is back to normal again, while Wayne's tiki-man has been enlarged to twice the height of the house.