The movie stars Zach Galligan as Billy Peltzer, Phoebe Cates as Kate Beringer, John Glover as Daniel Clamp, Robert Prosky as Grandpa Fred and Robert Picardo as Forster. As in the previous movie, Gizmo is voiced by Howie Mandel. The intelligent Brain Gremlin is voiced by Tony Randall. The veteran British horror actor Christopher Lee, who between the 1950s and 1970s appeared in many European movies as characters including Count Dracula, Frankenstein's monster, the Mummy and Dr. Jekyll and Mr. Hyde, also has a prominent role in Gremlins 2 as Dr. Catheter. A possible reference to Lee's role of Dracula may be made in the film, as the character Grandpa Fred appears frequently throughout the movie, dressed in a Dracula costume.
The emphasis in Gremlins 2 is more on comedy than on horror. It is considerably lighter in tone than the first movie. Most of the violence is creature on creature, rather than creature on human, and is slapstick and cartoonish in style. The film was rated PG-13 by the Motion Picture Association of America.
The action begins several years after the events of the first movie. Gizmo the Mogwai's elderly Chinese owner has died and his store has been demolished. Left to the wander the streets, Gizmo is picked up by a laboratory technician and taken to Dr. Catheter's research laboratory at the Clamp Building.
By coincidence the Clamp Building, owned by eccentric millionaire Daniel Clamp, is the place where Gizmo's former owner Billy Peltzer and his girlfriend Kate Beringer both work. Billy works in the design department and Kate is a tour guide. Billy has befriended Grandpa Fred, the host of a late night horror movie show on Daniel Clamp's TV network who dresses like a vampire.
When Billy learns that Gizmo is in the research laboratory, he rescues him and tells Kate to pick him up later. While he is left in the building, Gizmo gets splashed by water from a leaky drinkimng fountain. Four more Mogwais are then produced. As in the previous movie, one of Mogwai's offspring, known as Mohawk, has a stripe of white hair on his head, is more vicious than the others and acts as their leader. Kate accidentally takes one of Gizmo's children home, while the other three hold Gizmo hostage inside the building's air conditioning system.
The following day, Gizmo's children, having eaten after midnight, emerge from their cocoons as monstrous gremlins. Two of them attack the set of the Clamp networks' TV cookery show. They set off the sprinkler system and, when they get wet, hundreds more gremlins are produced.
Some of the gremlins enter the laboratory and drink chemicals which mutate them. One of them becomes female. One of them takes on characteristics of a bat. One of them, the Brain Gremlin, becomes highly intelligent and an eloquent speaker. One becomes a living electrical force. Meanwhile, Grandpa Fred, still in his vampire costume, hires a Japanese tourist as his cameraman and begins to film a live news report about the monsters attack on the building.
Billy, Dr. Catheter and Forster, the head of security, try to fight off the gremlins in the laboratory. The female gremlin immediately falls in love with Forster, who runs off in terror. Dr. Catheter is killed by the Electrical Gremlin. Billy escapes after Mohawk swallows a chemical which changes him into a spider-monster. Billy arrives in Daniel Clamp's office. The Electrical Gremlin tries to attack Clamp but becomes trapped inside Clamp's phone, which is put on hold. Billy hatches a plan to kill the gremlins. All of the clocks in the building will be put forward and a curtain representing the night sky will be dropped down in front of its windows. The gremlins, believing it is night, will go outside and be killed by the sunlight.
Kate is trapped inside a gigantic spider web made by Mohawk. She is rescued when Gizmo arrives. Gizmo has become so angry, as a result of the mistreatment that he has received from his children, that he has decided to behave like Sylvester Stallone's Rambo characetr. He kills Mohawk by setting him on fire.
The gremlins gather in the building's lobby. They are excited about going out into New York City and begin putting on a Broadway style musical number, during which one gremlin throws acid in another one's face, causing him to transform into a Phantom of the Opera-like character. Billy's plan to kill the gremlins with sunlight is foiled because it is raining. Instead, the gremlins are soaked with water. The Electrical Gremlin is then released from Clamp's phone, electrocuting them all. The gremlins dissolve into a gooey mess, one wearing a witch's hat, is heard to cry, "I'm melting! I'm melting!"
Daniel Clamp rewards Billy by making him head of design and rewards Grandpa Fred by making him the presenter of a prime time news show. Billy, Kate and Gizmo leave for Kate's apartment. The last scene of the movie shows that the female gremlin has survived. Dressed as a bride, she walks slowly towards Forster as the "Wedding March" plays.