Ariel, now married to Prince Eric, has given birth to a daughter named Melody. During the celebration that follows, Ariel's father, King Triton, gives Melody a locket revealing the kingdom of Antlantica. However, the sea witch Morgana, the sister of the deceased Ursula, arrives and abducts Melody, threatening to feed her to her pet shark, Undertow. In the confrontation that ensues, Undertow is shrunken by King Triton and Melody is rescued. However, Morgana escapes. After the incident, Ariel decides to keep Melody away from the sea until Morgana is found, and keeps Antlantica a secret from her.
Years later, a wall ahs been built around the castle. However, Melody often swims under the wall and into the sea, watched by Sebastian the crab. Eventually, Melody uncovers the secret locket. In the subsequent party celebrating Melody's twelfth birthday, a mishap involving Sebastian results in Melody being humiliated. Afterwards, Ariel discovers the locket and realizes that Melody had disobeyed her, prompting an argument that culminates in Melody fleeing from the castle and into the sea in an attempt to find answers. While out in the sea, she is lured into Morgana's lair by Undertow. Morgana reveals Melody's true heritage and offers to transform her into a mermaid. Melody accepts and is transformed into a mermaid, and is tasked by Morgana to take King Triton's trident. Meanwhile, Ariel, having learned of Melody's disappearance, is transformed back into a mermaid by Triton to search for her.
Guided by a penguin named Tip and a walrus named Dash, Melody is guided to the kingdom of Antlantica, where she successfully steals the trident. She returns to Morgana's lair, along with Ariel and her childhood friend Flounder, who had followed Morgana's stingrays to her lair. Ariel attempts to apologize for having kept Melody's heritage a secret from her, but an embittered Melody gives the trident to Morgana. The sea witch promptly takes Ariel hostage and imprisons Melody and Flounder in her lair.
Morgana arrives at the surface, where Scuttle the seagull has led Prince Eric and Triton's forces to her lair. However, Morgana proves too powerful to be defeated with the trident, and she restored Undertow to her original size. Tip and Dash manage to defeat Undertow by smashing him through Melody and Flounder's entrapment, freeing them. They return to the surface as Melody is restored her to human form. Melody, who is unaffected by Morgana's spells, climbs towards her and retrieves the trident before returning it to Triton. Morgana shoves Melody off the cliff, but she is rescued by Tip and Dash. Triton then encases Morgana in ice, and she sinks into the ocean.
Melody reconciles with her parents, who apologize for having kept her heritage a secret. The following day, Melody uses the trident to destroy the wall barrier around the castle, allowing the humans and merfolk to reunite.