The film begins with Alice (Milla Jovovich) narrating the key events from the first film. On September 29, 2002, exactly thirteen hours after the T-Virus outbreak in The Hive, the Umbrella Corporation sends in a research team to re-open the complex. The team enters The Hive through a secret insertion point beneath Raccoon City. Shortly after entering the research facility, the entire team is then slaughtered by the T-Virus zombies that had been sealed within the complex. With the entrance now open, Umbrella realizes that the highly infectious zombies will make their way to the surface and begin a full-scale outbreak on Raccoon City.
Some four hours later, much of Raccoon City lies in devastation after the outbreak. Umbrella has established a security perimeter around the city to keep the zombies in the quarantine area. As civilians reach the local checkpoints around the city, Umbrella operatives check them for infection. Soon, the infection reaches the quarantined gates, and Major Timothy Cain (Thomas Kretschmann), Umbrella’s security general, orders all checkpoints closed for good, leaving no exceptions. All civilians are ordered to return to the city or Umbrella will open fire on them.
Meanwhile, Alice wakes up in a downtown hospital, and recalls her recent memories. After surviving The Hive, Alice was recovered by Umbrella and used for experimentation. She has gained superhuman powers because the T-virus bonded with her on a cellular level. Outside, she sees the devastated streets and makes her way to a weapons store.
Elsewhere, Carlos Olivera (Oded Fehr) and two other Umbrella soldiers link up with multiple S.T.A.R.S. units and attempt to hold against an onslaught of zombies in the street. There are too many zombies to handle and they are eventually overrun. Carlos and his team fall back, but one is bitten and the group realize Umbrella had betrayed them.
Jill Valentine (Sienna Guillory) (a Raccoon S.T.A.R.S. unit member) together with Terri Morales (a news reporter) and Peyton Wells retreat to a church, where they are attacked by Lickers. They are saved by Alice, who informs them that Umbrella’s next step will be to nuke Raccoon City to stop the infection and silence any survivors. They decide to join together to try and escape the city.
Umbrella immediately sends their latest project, Nemesis to kill all S.T.A.R.S. operatives. He encounters L.J. (Mike Epps), a cab driver, and thirteen other members of S.T.A.R.S, who begin to attack it. Nemesis shrugs off their small-arms fire and easily kills them all, but spares L.J. when he drops his weapons.
Dr. Charles Ashford, a key Umbrella scientist and creator of the T-virus, has refused extraction by Umbrella until he has located and rescued his daughter Angela. He hacks into Raccoon City’s network of security cameras, and determines that she is at a school building. He also notices Alice and her group and contacts them, offering to arrange for an evacuation in exchange for rescuing Angela. Inside the school, the group encounters Carlos and his men, who have been given the same offer. After various encounters with zombie dogs and infected children, Carlos becomes the last survivor of his men and Alice loses an ally as well, but they manage to find Angela, and the remaining survivors escape the school.
Ashford gives them the location to the evacuation helicopter. Unfortunately Major Cain has been aware of the plan, and captures them, killing Ashford and sends Nemesis to fight Alice. She defeats Nemesis, but realizes his true identity (her former friend, Matt Addison) and refuses to deliver the killing blow. Her mercy appears to rekindle a trace of Nemesis’s former humanity, and they join forces and attack the Umbrella troops. Nemesis is killed in the ensuing fight, and Alice and the others escape in the helicopter, leaving Major Cain to be eaten by zombies just before the city is nuked.
The helicopter is caught up in the blast radius and crashes into the Arklay Mountains. Alice is impaled by a loose metal pole, presumably fatally, but she is found and recovered by Umbrella. She is taken to another Umbrella research station, where, after several weeks, she awakens in a giant water tank, completely healed of her injuries. Led by Umbrella scientist Dr. Isaacs, the doctors release and begin to question her. At first, she appears to have no memory, but soon a rapid series of images of recent events come flashing back in her mind, and she states with contempt “My name is Alice… and I remember everything.” She fights her way out of the facility only to be surrounded by dozens of armed guards. Suddenly, Jill, Carlos, and L.J. pull up in a SUV, disguised as Umbrella employees. Carlos shows the guards a written order placing her in his custody. They allow Alice to go, and as she enters the waiting vehicle, she sees Angela in the back seat. As they drive away, Angela asks Alice if she is alright. Alice doesn’t respond, and Dr. Isaacs is shown saying, “Program Alice Activated.” A close-up of her eye shows a flashing Umbrella logo as the film comes to an end.