Craig Jones, a young man living in South Central Los Angeles, has just lost his job after being framed for stealing on his day off. Not having any plans, he hangs out on his front porch with his best friend, Smokey, a snappy, mischievous drug dealer who sells weed for Big Worm, the psychopathic neighborhood supplier.
After Craig Jones (Ice Cube)' successful fight against the neighborhood bully Deebo (Tom Lister, Jr.) in the previous film, rumors spread that Deebo will be breaking out of jail soon and will be looking to enact revenge on Craig. As a result, Craig's father Willie (John Witherspoon (actor)) decides to have him stay with his uncle Elroy (Don 'D.C.' Curry) and cousin Day-Day (Mike Epps) in Rancho Cucamonga. Craig agrees to go, albeit reluctantly, as he does not want to leave behind his best friend Smokey, who is currently away at a rehabilitation center in an effort to cure his marijuana addiction. However, it isn't until Craig and Willie are about to leave, they have a brief confrontation with Deebo and his little brother, Tyrone (Sticky Fingaz).
The film begins when a robber (Rickey Smiley), disguised as Santa Claus, breaks into Craig (Ice Cube) and Day-Day's (Mike Epps) house at 3:37 AM on Christmas Eve. Craig fights with the robber, trashing their apartment while making frantic, futile attempts to wake Day-Day. The robber escapes with Craig and Day-Day's Christmas presents and rent money. The same morning, the police come over to get a report.