When 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 talks him into it, and along with Donkey (voiced by Eddie Murphy), they travel to the kingdom of Far Far Away. They meet Fiona's parents, King Harold and Queen Lillian (voiced by John Cleese and Julie Andrews), who are surprised and repulsed by Fiona's choice of husband (particularly the King himself), since they had arranged that Prince Charming rescue her from the castle but now they see that her husband is an ogre.

At a shared meal, Shrek and Harold get into a heated argument over how Shrek and Fiona will raise their family, and Fiona, disgusted at Shrek 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 her childhood diary and reading that she was once infatuated with Prince Charming (voiced by Rupert Everett).