A sequel to Scary Movie begins with a parody of The Exorcist, in which Megan Voorhees (Natasha Lyonne), is possessed and two priests, Father McFeely (James Woods) and Father Harris (Andy Richter), must drive the demon out. The exorcism doesn't go as planned, and a chain of The Exorcist-like vomiting occurs. Megan insults McFeely's mother and he shoots her in the head.

One year later, Cindy Campbell (Anna Faris), Brenda Meeks (Regina Hall), Ray Wilkins (Shawn Wayans) and Shorty Meeks (Marlon Wayans) are at college, trying to live new lives, after the events in the previous movie. (Although all of them died in Scary Movie, in a deleted scene, Brenda says her death was a near death experience, and Cindy was never officially declared dead.) Cindy and Brenda get tagged by a dorky girl, Alex Monday (Tori Spelling); Ray, who is still confused by his sexuality, has two new friends, Tommy (James DeBello) and Buddy (Christopher Masterson); while Shorty is still the same stoner he was in the last movie.

The story begins when a college teacher, Professor Oldman (Tim Curry) and his wheelchair-bound assistant Dwight (David Cross) plan to study the paranormal activity at Hell House, with the clueless teens as bait and for Oldman to get action with the college girls. Then, Theo (Kathleen Robertson) also becomes part of the study group.

When Cindy arrives at the Hell House, she meets a talking Amazon parrot who is vulgar and slanderous, and the caretaker, Hanson (Chris Elliott), who has great people skills and a genetically malformed little hand. After some weird incidents on that night (Cindy being beaten up by a cat, a toy clown attacking Ray (although due to preference in sexuality, it was the clown who was in trouble), Shorty getting attacked and smoked by a weed-monster, Alex getting raped in her sleep by Hell House's dead owner, Hugo Kane, and falling in love with him) the teens finally learn about the professor's plan and try to escape the mansion.

The professor gets killed by a sexy female ghost with disfigured features as the ghost of Hugo Kane seals all exits of the manor to prevent the surviving occupants from escaping. Shorty encounters the same sexy butterface ghost, but instead of being killed is shown having sex with her with a paper bag over her head. Alex becomes a crazed stalker who pursues Kane until the ghost is forced to kill her. Realizing that killing the ghost is the only way out, the teens are equipped with several technological devices by Dwight that serve to harass and injure the spectral enemy. They are pursued all throughout the mansion. Buddy and Cindy get locked in the walk-in refrigerator. Thinking that Buddy is dying from their previous encounter with the ghost, Cindy gives him a "hand," with explosive results evoking memories of a similar situation from the first movie. After they escape from the room, Buddy flees while Cindy is chased by an undead skeleton and Brenda rips its head off. Hanson gets possessed, and Cindy, Brenda and Theo parody Charlie's Angels to get him, but end up beaten up. Eventually, they use Cindy as bait to lure the Kane ghost to a device that ultimately destroys him.

Two months later, taking care of the parrot though he despises her for talking too much, Cindy and Buddy are in a relationship and go out on a walk until Buddy disappears without notice as she looks up to see Hanson serving at the hot dog stand. She screams "No!" while Hanson screams "Yes!". Hanson is instantly hit by a car (although is not declared dead) driven by Shorty, who was distracted because he is being given fellatio by the butterface ghost, still with the bag over her head.