A little over two years after the events of the first film, a now 8-year-old Andy Barclay (Alex Vincent), has become a ward of the state after his mother Karen was placed in a mental institute after sticking to her story about Chucky in court. CEO of the Play Pals company Sullivan (Peter Haskell) has the Chucky doll re-assembled to show nothing is wrong with it. Doing this, reawakens the soul of Charles Lee Ray aka Chucky (voice of Brad Dourif) who now goes in search of Andy.
At the same time, Andy is placed in a foster home, being taken in by Joanne (Jenny Agutter) and Phil Simpson (Gerrit Graham). Andy is also introduced to his rebellious 17-year-old foster sister Kyle (Christine Elise). Chucky tracks down Andy and resumes his murderous ways in order to transfer his soul into Andy to become human, leaving Kyle as the only person who can protect Andy and help him stop Chucky.