The film begins immediately after the events of the previous film. The Incredibles and Frozone battle The Underminer and prevent him from destroying City Hall, but are unable to stop him from robbing a bank and escaping. The collateral damage outrages the government and prompts the shut down of the Superhero Relocation Program, denying the Parrs and other superheroes financial assistance. Violet's love interest Tony Rydinger discovers her superhero identity, causing agent Rick Dicker to erase his memory of her.
Wealthy businessman Winston Deavor and his sister Evelyn, who run the media and telecommunications giant DevTech, propose secret missions for superheroes which will be recorded and publicized to regain public trust. Winston chooses the less accident prone Elastigirl over Mr. Incredible for the initial missions. Bob struggles in his new role as a stay-at-home parent: trying to help Dash with math homework, Violet's heartache over Tony standing her up for their first date (due to his memory wipe), and Jack-Jack wreaking havoc with his burgeoning superpowers.
Edna Mode develops a suit to help control Jack-Jack's abilities. Meanwhile, Elastigirl encounters supervillain "the Screenslaver", who projects hypnotic images via TV screens. After preventing him from destroying a crowded commuter train, and thwarting his attempt to assassinate an ambassador, she tracks him to an apartment building and unmasks him as a pizza deliveryman who claims to have no recollection of his actions.
At a party celebrating the Screenslaver's arrest, Winston announces a summit of world leaders to legalize superheroes, hosted aboard his luxury yacht, the Everjust. Elastigirl discovers that the arrested pizza deliveryman is not Screenslaver but was being controlled by hypnotic goggles. Evelyn forces the goggles onto Elastigirl, revealing herself to be the Screenslaver.
Evelyn explains her grudge against superheroes since her father was killed by burglars while calling superheroes for help instead of hiding (unlike Winston who believed the lack of superheroes was the reason) and her mother's subsequent death due to heartache. She plans to sabotage her brother's summit by causing a catastrophe to irreparably tarnish the reputation of all superheroes, ensuring they remain outlawed forever and the public will not return to relying on superheroes to handle crises. She lures Bob into a trap and sends a group of hypnotized superheroes to subdue the Parr children. Frozone tries to protect them but is overwhelmed.