Trama

After Shrek (voiced by Mike Myers) and Fiona (voiced by Cameron Diaz) come back from their honeymoon, they find an invitation to a royal ball with Fiona's parents to celebrate their marriage, an event Shrek is reluctant to participate in. Fiona, Shrek, and Donkey (voiced by Eddie Murphy) travel to the kingdom of Far Far Away and meet Fiona's parents, King Harold and Queen Lillian (voiced by John Cleese and Julie Andrews), who are surprised by Fiona's choice of husband and her new appearance. Harold becoming repulsed and at a shared meal, Shrek and Harold get into a heated argument over how Shrek and Fiona will raise their family.

Fiona, disgusted at Shrek's and her father's behavior, locks herself away in her room that evening, where she meets her Fairy Godmother (voiced by Jennifer Saunders), who is also surprised at Fiona's new looks. Shrek worries that he has lost his true love, particularly after finding the diary from her teen hood and reading that she was once infatuated with Prince Charming (voiced by Rupert Everett). King Harold is accosted by the Fairy Godmother and Charming, her son. He had arranged with the Fairy Godmother that Prince Charming would overcome many obstacles in order to rescue Fiona and break the spell, finding instead the Big Bad Wolf using the tallest tower as a hangout. They reprimand Harold for breaking an old promise that Charming would be able to marry Fiona and demand that he finds a way to get rid of Shrek.

After Shrek reads Fiona's diary and pages containing the single phrase "Mrs. Fiona Charming", Harold arranges for Shrek and Donkey to join him on a fictitious hunting trip, which really is a trap to lure the two into the hands of an assassin, Puss in Boots (voiced by Antonio Banderas).

When Fiona realizes that Shrek left, she asks her father for help, but he replies that he always wanted the best for her and that she should think about what is the best for her, too. Puss is unable to defeat Shrek and, revealing that he was paid by Harold, asks to come along as a way to make amends. Shrek decides to go to the Fairy Godmother for help. However, the Fairy Godmother states that ogres do not live "happily ever after." Nonetheless, the three sneak into the Fairy Godmother's potion factory and steal a "Happily Ever After" potion that Shrek believes will restore Fiona's love for him. Shrek and Donkey both drink the potion, which doesn't appear to work, but when it starts to rain, they leave, and in doing so they fail to notice that a mushroom that Shrek previously sneezed potion on changes into a beautiful rose. They wait out the storm in a barn and, while there, Shrek and Donkey become dizzy and fall over and into a deep sleep.

When they awake, they discover the potion has taken effect: Shrek is now a handsome human, while Donkey has turned into a stallion. In order to make the change permanent, Shrek must kiss Fiona by midnight. He, Donkey, and Puss return to the castle to discover that the potion has also transformed Fiona back into her former, human self. However, the Fairy Godmother, having learned of the potion's theft, sends Charming to the castle, where he poses as Shrek to win Fiona's love. Although Harold recognizes Charming for who he really is, he doesn't speak up. Shrek sees Charming and Fiona together, and the Fairy Godmother tricks him into thinking that they have fallen in love and urges him to leave. Believing Fiona to be happier with Charming, Shrek sadly leaves.

Realizing that Fiona hasn't fallen for Charming, the Fairy Godmother gives Harold a love potion to put in Fiona's tea, which will cause her to fall in love with the first person she kisses. Harold, knowing that it is wrong to do that to Fiona, refuses, but the Fairy Godmother threatens to take away his 'Happily Ever After', which she helped him get. Shrek, Donkey and Puss overhear the exchange, and are noticed by the Fairy Godmother, who has them arrested by the royal guards and thrown into a dungeon, in a parody of COPS. When the royal ball begins, several of Shrek's friends band together to free the trio (having seen their arrest via the Magic Mirror) and create a gigantic gingerbread man (whose name is Mongo), which breaks through the castle's defenses so Shrek can stop Charming from kissing Fiona, but Mongo is presumably killed when his arms break and he falls into the moat with Gingy devastated. When Shrek arrives, Charming forcibly kisses Fiona, who then knocks him out with a headbutt.

When the Fairy Godmother confronts Harold, he reveals that he never gave Fiona the love potion, having realized her love for Shrek. The Fairy Godmother tries to attack Shrek and Fiona with a spell from her wand, presumably to kill him, but it rebounds off Harold's armor when he commits self-sacrifice to save Shrek and disintegrates the Fairy Godmother into a cloud of bubbles; it also returns Harold to his true form, that of the Frog Prince. The Fairy Godmother had made a deal with Harold to turn him into a handsome man, so that he could win over Lillian, to make her kiss him and change him into a human permanently, in exchange for Charming marrying his soon-to-be daughter. Harold apologizes to Shrek and Fiona for everything he has done, and now realizes what is best for Fiona. Shrek forgives him, and Lillian tells Harold that she still loves him no matter what.

When it is almost midnight, Shrek tells Fiona that if they kiss now, then their change will be permanent. But Fiona says that she wants to spend her life with the ogre she married, and Shrek and Fiona let the potion's effects wear off, with Donkey changing back as well, much to his chagrin. Harold gives his blessing to the marriage, and the party resumes as Puss and Donkey (along with Mongo) sing "Livin' la Vida Loca".

In a post-credits scene, Shrek, Fiona and Donkey are still partying in the night. Dragon, who Donkey has married following the events of the first film, arrives with her and Donkey's new children called the "Dronkeys".