Big Enos Burdett is attempting to be elected as Governor of Texas against other candidate, John Coen. After a figurative and literal “mudslinging” between the two, they are both confronted by the outgoing governor, and given a thorough tongue lashing. As Burdett is leaving the office he overhears the governor yelling at an assistant to take responsibility of transporting a crate of unknown content from Miami to the Republican Party convention in Dallas. Burdett then schemes to pick up the crate and deliver it to the convention. He enlists the help of Bandit and Cledus to carry out the task.

The early parts of the film feature Cledus attempting to convince the Bandit to “do it one last time.” Unfortunately, in the time since their previous challenge in the original Smokey and the Bandit film, the Bandit has split from his love-interest “Frog” (Sally Field) and become an alcoholic. The Bandit is said to be “the only man in the world to drink up a Trans Am,”. Cledus seeks the help of Frog to encourage the Bandit to sober up and regain his fitness, since Big Enos has raised the stakes of the game to $400,000. Frog abandons her second attempt at wedding Buford T. Justice's son Junior to help. She is initially persuaded more by the money than her love for Bandit. She buys him a 1980 Turbo Trans Am “Son of Trigger”... powered by the Turbo 301, by trading in Junior's car.

The middle sections of the film feature a madcap race across the United States as the trio once again tries to outrun and outwit Justice and Junior. The team discovers that their cargo is in quarantine for three weeks, and they need to get it to Dallas in three days. When they break into the quarantine area to steal the crate, the mysterious cargo turns out to be an elephant (the mascot of the Republican Party) who they named Charlotte after Snowman remarked that she reminded him of his Aunt Charlotte and even smelled like her, too. When Cledus opens the crate containing the elephant, Charlotte races out, nearly trampling Frog. The Bandit saves the day by doing a backflip onto the elephant's back and riding the elephant out of the quarantine shed. Noticing a splinter was stuck in her foot, the Bandit removes it, and the elephant takes a shine to Bandit. On their way to Dallas, Cledus fears Charlotte is in poor health. They find an Italian doctor, played by Dom DeLuise, in the back of an ambulance stopped at the same gas station as they are. When the doctor, a gynecologist by trade, finds out it is an elephant he has to look at, he freaks out and nearly runs away. As the doctor attempts to refuse helping them, he sees his driver speed away in the ambulance, leaving him stranded. After the Bandit and Cledus bribe him with large amounts of money he gives in and agrees to ride in the truck with the elephant and examine her. Charlotte is later discovered to be pregnant, and eventually gives birth later in the film.

As they try to make the Burdett's deadline, the doctor pleads with the Bandit for some time off the road so Charlotte can rest off of her feet. He reluctantly gives in twice, the first time wrapped up by Charlotte, the second time agrees on his own, Frog citing Bandit's desire to regain his lost fame of the past. She grows closer to him as she did in the past film. While at a restaurant, she sees him scribbling on a napkin a picture of Charlotte cradled by suspended netting in order to keep her off of her feet. She becomes furious and leaves. The Bandit follows and she says he does not care about the elephant and when he likes himself again would she then consider seeing him again.

He later makes his drawing a reality, in a near drunken stupor. The doctor agrees the idea will work and agrees to press on. Unable to stop the Bandit and Cledus, Justice enlists the help of his two brothers, Reginald Van Justice from Canada, and Gaylord Justice, from another part of Texas. Justice lures the Bandit into a valley, with a line of Mounties on one hill side, Texas Rangers on the other. Bandit orders Cledus to continue delivering Charlotte to Dallas. Cledus later returns, with a convoy of trucks to help destroy all of the police cars. Charlotte and the doctor watch the action from afar. After the mass destruction of police cars, only Buford, Gaylord, and Reginald come out relatively unscathed. Bandit and Cledus escape the valley by driving across a bridge of tractor trailers. As the Justice's follow, a trailer pulls out resulting in their cars falling down and being destroyed. However, Buford's car is still operable, though folded up in the middle and missing its doors and roof. Justice and Junior are cut off by a farm tractor, and they drive off the road, hitting an embankment by a pond, throwing Junior into the pond. When asked what he was thinking about, Buford simply says, “Retiring.”

The movie closes with Bandit informing Frog he liked himself again, that he didn't want to spend the rest of his life without her. When she asks about Burdett's bet, he informs her he blew it, and said they could still get there nonetheless, late though. He shows her Charlotte and her baby in circus-like chariots. Frog is overjoyed. Bandit asks Charlotte if it is OK to marry Frog, to which Charlotte responds loudly. They drive away with Charlotte and her baby in tow, Buford still pursuing them in a bus.