The film is set in a post-ice age Alaska, where the local tribesmen believe all creatures are created through the Spirits, who are said to appear in the form of an Aurora (astronomy). Three brothers (Kenai, the youngest brother; Denahi, the middle brother; and Sitka, the eldest brother) return to their tribe in order for Kenai to receive his totem, a necklace in the shape of an animal. The particular animal it represents symbolizes what he must achieve to call himself a man. Unlike Sitka, who gained the eagle of guidance, and Denahi, who gained the wolf of wisdom, Kenai receives the bear of love. He objects to this, stating that bears are thieves, and believes his point is made a fact when a bear takes some salmon. Kenai and his brothers pursue the bear, but a fight follows on a glacier, during which Sitka gives his life to save his brothers, although the bear survives. Angered, Kenai heads out to avenge Sitka. He chases the bear up onto a mountain and kills it. The Spirits, represented by Sitka's spirit in the form of a bald eagle, transform Kenai into a bear after the dead bear's body evaporates. Denahi arrives, mistaking Kenai as dead, and believing his bear form is responsible, vows to avenge Kenai by hunting it down.
Picking up several months after the events of the first film, Kenai, now a cave bear, is living happily with his foster brother Koda. Having just awoken from hibernation, the bears begin traveling to Crowberry Ridge for the first berries of the season. However, Kenai is haunted by memories of his childhood friend Nita, to whom he gave a special amulet many years ago after saving her from drowning. Nita, now grown up, is set to wed Atka, a man from a neighboring Inuit village. However, on the day of the wedding, the Spirits appear in the form of a storm that causes a fissure to open up in the ground between Nita and Atka, much to Nita's horror. Believing it to be a sign, Nita consults the wisest shaman of the tribes. By communicating with the Spirits, the shaman reveals that the amulet that Kenai gave Nita all those years ago bonded her and Kenai together. The only way for Nita to sever the bond and be able to marry Atka is to find Kenai, go with him to Hokani Falls (where Kenai gave Nita the amulet), and burn the amulet on the eve of the Equinox, thus returning the bond to the Spirits. The shaman grants Nita the ability to communicate with Kenai and the other wildlife for this journey.