In the opening scene, Scrat, the saber-toothed squirrel climbs a glacier but accidentally opens a hole in it. The world of ice is slowly melting. The creatures of the Ice Age are all shown enjoying themselves on slides and pools made by the melting ice; among them the three protagonists of the first film: Manny, Sid, and Diego. Sid opens a day camp, where none of the younger creatures take him seriously, nor do Manny and Diego, which leaves Sid seeking a daring deed. Fast Tony, a local con artist is claiming that the earth will flood and that the bark and reeds which he sells are needed to stay alive. Manny dismisses the idea, but is distracted when he sees that Sid will try to high dive from a giant waterfall; as Manny goes with Diego to the top of the waterfall to save Sid from his act of daredevilry, they see that the pleasant weather caused the ice of the valley to melt, and it is kept from destroying the valley only by the glaciers, which have formed a dam. A turkey vulture tells the animals that a giant tree can act as a boat and save them; all soon set out to find it. As the animals begin their journey, Sid sings three songs to tease Manny about Mammoths being "extinct".During the time that the masses of animals escape, a glacier which contains two sea reptiles from the Mesozoic era, Cretaceous and Maelstrom, breaks off.

Diego and Sid encounter two mischievous opossums named Crash and Eddie who drive them nuts. Manny is teased about being the last mammoth alive, but meets Ellie, a female mammoth who believes she is an opossum and the sister of Crash and Eddie. Sid invites her to tag along with the group to escape the flood, and she brings her brothers. After a perilous ordeal with Cretaceous and Maelstrom, Sid finds out that Diego is afraid of water, prompting him to encourage Diego to admit and face his fears - Diego insists "Fear is for prey", so Sid points out that Diego is behaving as if he is water's prey. They discover an area which Ellie recalls as the place where she was adopted. She finally realizes she is a mammoth but distances herself from Manny when he suggests "saving their species". Ellie and Manny ultimately make up when they must co-operate to save the group when the ground cracks under their feet. Sid is kidnapped by a tribe of mini-sloths who believe Sid to be a god. Sid lights a fire for them, and believes that he has finally found respect, but they plan to sacrifice him to a volcano. Sid escapes. The next morning Sid tells the others his experience but none are convinced. They find a field of hot geysers, which separate Manny, Sid, and Diego from Ellie and her brothers.

When the flood comes, Manny saves Ellie from drowning as she is caught in a cave (due to falling rocks), while Diego overcomes his fear of water to save Sid. Cretaceous and Maelstrom arrive, but due to Manny's quick thinking, they are finished off by a rock which falls on them, killing them both. The other animals are at the mercy of the water currents. Meanwhile, Scrat climbs up the glacier and at the top sticks the acorn he has into the ice. This forms a crack in the glacier, which widens into a fissure, diverting the flood and saving the animals. Scrat is then washed away. In the final scene, a herd of mammoths shows up, but Manny and Ellie decide to remain together anyway, taking Sid, Diego, and the opossum brothers along. Sid encounters the mini-sloths again - they believe Sid stopped the flood and invite him to be their leader. Diego, surprised to see the mini-sloths are real, convinces Sid to stay with the others, reluctantly admitting that Sid is a vital part of their 'herd'. The epilogue shows Scrat having a near death experience after falling into the fissure. He enters a heaven full of acorns. Suddenly, he finds himself torn away. He unhappily wakes up, having been resuscitated by Sid.