This sequel to Men in Black (1997) is set five years after Agent K's retirement, when Agent J (Will Smith) has become the top operative for the MIB, the New York City-based agency that secretly monitors and regulates extraterrestrials' activity on Earth. J has no permanent partner since agent K resigned and Agent L returned to work in a morgue. Subsequent partners have not lived up to J's standards so he neuralyzes them back to civilian status.
While investigating a crime at a SoHo pizzeria and questioning the waitress Laura Vasquez (Rosario Dawson), J uncovers a plot by Serleena, the shape-shifting Kylothian Queen. After destroying several planets, she sneaks onto Earth, and disguises herself as a lingerie model (Lara Flynn Boyle). In her own form, she resembles a plant-like hydra. The memory-wiped "neuralyzed" Agent K (Tommy Lee Jones) has resumed civilian life as Kevin Brown, postmaster in Truro, Massachusetts.
Unbeknownst to him, the post office workers are aliens monitoring him. To stop Serleena, J must convince Kevin to rejoin MIB. K is the only living operative who knows how to find the Light of Zartha.
While J prepares to deneuralyze Kevin, Serleena takes over MIB HQ, which locks down, causing the deneuralyzer to go into a standby mode and flushes them out on Times Square. After J searches for the deneuralyzer on the internet, he takes K to Jack Jeebs (Tony Shalhoub), who owns an illegal deneuralyzer. Although K eventually starts to regain some memories, he cannot recall the "Light of Zartha".
K neuralyzed himself in order to keep the information for himself and left the clues for himself. They take Laura to the "worm guys" in their apartment so she could be kept safe.
They first stop at a video store, where they watch a tape that jars K's memory. In a fictionalized version of the truth, 25 years ago, the Zarthan Queen Laurana arrived on Earth to hide the Light of Zartha. Wanting to remain neutral from the war, the MIB refused to help. Serleena arrived to steal the Light, but K activated the Zarthan ship and sent it away.
Believing the Light was aboard, she chased the ship after killing Laurana. K reveals that the ship was a decoy; the Light remains hidden on Earth for safekeeping, but Serleena realized this.
After this, K returns to the SoHo pizzeria and finds a key for the Grand Central Terminal, where they find a locker full of micro aliens that live in the locker with their own city. K looks for the clues and takes the watch, which is actually counting the time until midnight, and they have an hour to figure out the meaning of it, with J leaving his own watch on the top.
Meanwhile, Serleena frees MIB's worst high-security prisoners and recruits them as her henchmen, including Jarra, J's old nemesis who tried to steal Earth's ozone layer. Believing the Light is in the bracelet worn by Laura, Serleena kidnaps her and prepares to send Laura back to Kyloth. K and J, helped by the worm guys, assault MIB headquarters, defeating Serleena's henchmen and rescuing Laura from being launched, with J defeating Jarra.
However, K warns them that if the Light is not sent to Zartha, it will explode and destroy the planet. Serleena is eaten by Jeff, a giant alien worm living in the New York subway system. At the departure point, K reveals that Laura is Laurana's daughter and also the Light of Zartha.
To save Earth and Zartha, Laura leaves Earth. She and J are both reluctant, since they have fallen for each other. Serleena, having assimilated Jeff, returns to capture Laura again. K and J are finally able to destroy her and Laura escapes to Zartha.
To cover up the events caused by Serleena's rampage, K activates a giant neuralyzer hidden in the Statue of Liberty's torch. K and Chief Zed (Rip Torn), the head of MIB, try to console J for the loss of his love. For comfort, K puts the tiny city of aliens into J's locker. When J suggests showing the miniatures their world is bigger than a locker, K shows J that they themselves are in a locker of a huge alien station.