The film begins with Alice going over the events from the first film. On September 29, 2002, exactly thirteen hours after the T-Virus outbreak in The Hive, which had occurred that same day, 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 before long, these 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 set a huge gate around the city to keep the zombies in the quarantine area. As civilians reached the local checkpoints around the city, Umbrella executives checked them for infection. Once the virus reached the gate, Major Timothy Cain (Thomas Kretschmann), Umbrella's security general, ordered all checkpoints closed for good, leaving no exceptions. All civilians must return to the city despite the odds, or Umbrella will shoot them on the spot.
Meanwhile, Alice (Milla Jovovich) wakes up in a hospital in downtown, dazed. After surviving incident in The Hive, Alice was taken by Umbrella and used for experimentation. She was injected with the T-virus, and now had become superhuman, with strength and dexterity. She exits the hospital and finds the streets in devastation. She finds transportation and heads towards a weapons surplus store.
Elsewhere, Carlos Oliveira (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 over run. Carlos and his team fall back,even after one of them gets bitten and are seeking evacuation but realize they have been betrayed by Umbrella, left for dead in the infested city.
Jill Valentine (Sienna Guillory) (a Raccoon S.T.A.R.S. unit) and her friends fall to the Church, where they are attacked by Lickers, but saved by Alice, who was passing by. They join together and try to escape the city.
Umbrella immediately sends their latest project, Nemesis, formerly Matt Addison, to kill all S.T.A.R.S. operatives. He encounters with L.J. (Mike Epps), a cab driver, and 13 other cops. He kills every police officer, but spares L.J., because his orders were to kill the S.T.A.R.S., not civilians, not to mention his threat level readout placed the cab driver as zero threat.
Charles Ashford, a key Umbrella scientist and creator of the T-virus, taps into Raccoon local cameras, and begins to look for his lost daughter, Angela. He finds Alice and asks her gang to look in her school, in exchange for a ride out. Soon, after their teammate was shot and Carlos was bitten, Carlos and the remains of his men are contacted and agree, heading toward the Junior School. He is able to save LJ and the two team up meeting Alice, Jill and Angela in the cafeteria and finding that he is the last man left of his team. The five of them are able to leave the school and Carlos says that he had been bitten and outside on the phone Dr. Ashford reveals the transport out.
As they drive, Alice explains the first movie and gives Carlos the antivirus thanks to Angela having it with her and Ashford states their escape vehicle is a high-jacked Umbrella Chopper. When they arrive, Major Cain captures them, executing Dr. Ashford and commanding Alice to face off against Nemesis. After a long fist fight with the antagonist, Alice wins by impaling Nemesis on a sharp peice of metal pertruding from the wall, and Nemesis remembers who he is and starts attacking Umbrella troops, thus freeing Alice. An action sequence then ensues which results in Nemesis destroying an Umbrella helicopter and pushes Alice out of the way as it crashes downward, crushing and killing him. The group then escapes using the chopper and Alice throws Cain out of the helicopter. Cain vainly tries to save himself from the Zombies by shooting them then gives up and tries to shoot himself, then realizing he has no bullets, the zombies then eat him. Then, shortly before dawn, on September 30, 2002, a thermonuclear warhead is launched and strikes the Raccoon City Hall destroying Raccoon City completely.
The chopper is hit by the shock wave, and thrashed into the Arklay Mountains. Inside Alice is impaled as she saves Angie from a loose part of the chopper. The others escape, and Umbrella arrives to take Alice to the Arklay Research Center. After the incident it is said in the news that Olivera and Valentine have handed in the tape made by Terri Morales but even though they are believed for the time being, Umbrella finds a way to discredit them completely. Three weeks later, Alice is reborn using a new strain of the T-Virus, giving her new powers. She kills all the guards and escapes, as Valentine & Oliveira pick her up, to begin their hunt for Umbrella. The movie ends with Alice's eyes suddenly resembling the Umbrella logo. Umbrella begins the mysterious Alice Project, unbeknownst to Alice's compatriots.