It is the eve of the first day of school for Mack (Maia Mitchell) and Brady (Ross Lynch), who spend it at Dolphin's Cove celebrating their "meet-iversary" and reminiscing about the summer and the day they met at Dolphin's Cove over Brady's favorite movie, Wet Side Story, the movie Mack and Brady got stuck in during the events of Teen Beach Movie ("Best Summer Ever"). After surfing, Brady asks Mack if things will change between them at school. Mack says no; she then notices she lost the necklace she received while in Wet Side Story's universe. Thinking it is lost forever, they swim away.
The next day, Brady reunites with his friend Devon (Raymond A. Cham, Jr.), while Mack reunites with her friend Alyssa (Piper Curda); both are shocked about their new relationship due to their polar opposite personalities. Brady then runs into Mack, and both are taken aback by how they act at school. Later, in marine biology class, Brady is working on designs for a surfboard, but hides it when Mack asks him what he's up to. Mack then bumps into Spencer Watkins (Ross Butler), who Alyssa said was the cutest guy in school, and Brady becomes defensive. After school, Brady tries asks Mack to hang out, but Mack is too busy preparing for a "Save the Beach" dance. Mack reminds him about a college fair, and he promises he'll be there with Mack. Brady struggles with a college application, so goes to work on a surfboard with Wet Side Story on in the background.
The movie turns to Wet Side Story, where Tanner (Garrett Clayton) is preparing to go to the lighthouse to save Big Momma's. Lela (Grace Phipps) suggests she could help, breaking the movie's plot line, but Tanner gets Lela to back down, and the movie returns to normal, albeit with a visibly shaken Lela.
Later, Brady realizes he's late for the college fair, but by the time he gets there, the fair has ended. Mack and Brady argue about how Mack is so busy and Brady hides things from Mack, and they agree not to see each other until next summer ("On My Own").
Meanwhile, in the Wet Side Story universe, Lela sings "Fallin' For Ya," but ultimately can't take it anymore and leaves Big Momma's, breaking the movie's plot line. Tanner rushes out to see what's wrong with Lela, and she says she was changed by her encounter with Mack. Lela then finds the necklace she gave Mack washed up on the beach, and Lela and Tanner go into the ocean, ultimately winding up in the present day real world, where they are stunned by all of the modern day advances.
Brady and Mack run into each other on the beach, still with tension, but they spot Lela and Tanner and reunite with them. Mack and Brady tell them they're in the future, exciting Lela and Tanner ("Right Where I Want to Be"). Mack and Brady debate telling them the truth after noticing that Tanner and Lela's hair can't get wet, but decide instead to show them that the real world isn't as great as it seems.
Back in Wet Side Story, the characters are confused without Lela and Tanner. Butchy (John DeLuca) has Cheechee (Chrissie Fit) sing "Fallin' For Ya," but she is constantly interrupted by Seacat (Jordan Fisher) ("Fallin' For Ya"). Nobody notices that a background character disappears as he enters Big Momma's.
Brady and Mack bring Lela and Tanner to school, where their movie characteristics come out against Mack and Brady's cautions, culminating in a big musical number in the cafeteria ("Turn That Frown Upside Down"). Lela becomes too enthralled with math homework to hang out with Tanner after school and goes to Mack's house, so Tanner hangs out with Brady, and they have a heart to heart – Tanner was worried that Lela came to this world because he wasn't enough for her. Brady then alludes to his rough patch with Mack, and reveals that he's been working on unique surfboards; he says that Mack can't know because she might not get it, given her plans to go to college. Mack, meanwhile, tries to convince Lela that the movie world was better, but when she suggests that Lela only needs a boy who loves her, Lela uses Mack's words against her. When Mack notices Lela wearing normal clothes, something she couldn't do before, she calls Brady, and they both discover that the two are becoming part of the real world. They then tell Lela and Tanner that they are just characters in a movie, showing them clips from Wet Side Story ("Silver Screen"). This doesn't sit well with Lela, who throws the necklace into the ocean, prompting Mack and Brady to search for it; this leads to another argument between them, which disturbs Lela and Tanner.
While this all is happening, in the Wet Side Story universe, the gang sees people disappearing. Butchy, realizing that all of this started after Tanner and Lela left, notices the necklace washed up, and leads the gang into the ocean to get Tanner and Lela back. They come out into the real world and everyone reunites. When Lela resists their calls to return, Butchy tells her about the disappearing characters; Brady and Mack realize that with no movie stars, there's no movie. Lela agrees to leave, and the movie characters retreat into their world, and Mack and Brady
