The film begins with a flashback to the first film, with Gandalf battling the Balrog on the Bridge of Khazad-dûm, but this time continues from Gandalf's perspective, with the scene continuing to follow both as they hurtle down below, fighting while in free-fall. The moment they hit the water of an underground lake, Frodo awakens from his dream and continues his journey with his trusted and loyal friend, Sam through the rocky region of Emyn Muil, where they become lost. Soon they are attacked by the ring-possessed Gollum wishing to retrieve "his precious" from the ones he thinks stole it from him. The Hobbits subdue and bind him with Sam's Elven rope given to him by the Elven elder Galadriel in Lórien. Sam distrusts Gollum and wishes to abandon him, but Frodo understands the burden of the creature and takes pity on him. In need of a guide, Frodo removes the rope from Gollum's neck and persuades him to lead them to the Black Gate of Mordor.
In Rohan, the pack of Uruk-hai run across the grassy landscape with their captives Merry and Pippin. Aragorn, Legolas and Gimli are in pursuit, following three days of running, Legolas surmises the Hobbits are being taken to Isengard, where Saruman is marshaling his Uruk-hai forces to do the bidding of Sauron. In the kingdom of Rohan, home of the horse lords, King Théoden is mentally and physically weak due to the enchantments of his steward, Gríma Wormtongue, who is secretly in the service of Saruman. Orcs and Wild Men of Dunland incited by Saruman freely roam the land and kill the people including the king's only son Théodred. Théoden's nephew Éomer interrogates Gríma, angrily realizing he has lustful eyes for Éomer's sister Éowyn and that he is now an agent of Saruman. Gríma banishes Éomer for undermining his authority and Éomer sets forth to gather the remaining loyal men of the Rohirrim throughout the land.
Éomer and his Rohirrim ambush and kill all of the Orcs and Uruk-hai holding the two Hobbits captive at nightfall. During the battle, Merry and Pippin narrowly escape their captors by fleeing into the nearby Fangorn forest. Éomer later encounters Aragorn, Legolas and Gimli and in turn tells Aragorn there were no survivors of the Orc/Uruk-hai slaughter. Upon arriving at the battle site, Aragorn uses his tracking skills and finds hobbit tracks that lead into Fangorn. We see Merry & Pippin as they flee into the forest pursued by the orc who previously attacked them. They are aided by Treebeard the oldest of the tree-like creatures, the Ents, who takes them to the one he calls the white wizard, whom Merry & Pippin assume to be Saruman; we leave them looking up at him.
Frodo and Sam traverse the Dead Marshes, passing the undead fallen warriors of the Second Age who haunt the marshes. Frodo becomes enchanted by the spirits living in the waters of the marsh and falls in. He's pulled out before he drowns by Gollum. The three also hide from a newly-seated Ringwraith on his flying fell beast, a large black dragon.
In Fangorn Forest, Aragorn, Legolas and Gimli discover the mysterious white wizard who is ultimately shown to be Gandalf reborn, now known as Gandalf the White. He speaks of his ordeal w/ the Balrog, & we see his defeat of the Balrog. Gandalf summons Shadowfax, the lord of the Mearas - an ancient & noble race of horses - & the quartet proceed to Edoras. Meanwhile, Frodo, Sam & Gollum reach the Black Gate, finding it to be heavily guarded, (they observe a contingent of Easterlings from Rhûn arrive to reinforce the garrison) only to have Gollum reveal to them a less risky path; Sam remains distrustful, but Frodo gives him the benefit of the doubt & begins calling him Sméagol. While observing the gate, the rocky ledge on which Sam lays gives way and he tumbles down the cliff. Frodo rushes to help him and, in desperation, throws the cloak given him by Galadriel over them both. Easterlings who'd wandered over to investigate the disturbance, are unable to see them under the cloak which has the appearance of a boulder.
Gandalf & company approach Meduseld in Edoras, where Theodred has just died with Éowyn at his bedside. After much ado, they exorcise Saruman's spirit from King Théoden and banish Wormtongue. Théoden is confronted with his dead son and, rather than risk open war, decides to flee to a large fortress called Helm's Deep which in times of trouble has saved the people of Rohan. Gandalf leaves to find Éomer and his Rohirrim, promising to return within five days, as a strong attraction draws Éowyn to Aragorn during the journey to Helm's Deep. Wormtongue flees to Orthanc and tells Saruman of Rohan breaking from their grip; Saruman then decides to destroy Rohan.
In Ithilien, Sméagol battles his split personality in an attempt to befriend Frodo and Sam and ultimately banishes Gollum, his "evil" half. The two hobbits are witness to an ambush of Southrons but are taken captive by soldiers of Gondor.
Meanwhile, along the journey to Helm's Deep, Éowyn becomes more attracted to Aragorn. When the travelers are attacked by Saruman's Wargs and their Orc riders, an unhappy Éowyn is tasked with seeing the people of Edoras safely to Helm's Deep. During the battle, Aragorn is dragged by a Warg and falls off a cliff into a raging river as the grief-stricken survivors reluctantly move on to the fortress.
In Isengard, Saruman reveals his huge army to Wormtongue & sends them off to make war on Helm's Deep; Merry & Pippin in the company of Treebeard, realize the war is starting; in Rohan, Aragorn washes up on the river's edge and is nudged back to consciousness by his horse, Brego. Battered but undaunted, he rides to Helm's Deep. In Rivendell, Elrond knows that the age of Elves is ending and convinces Arwen that it is hopeless to stay and she should leave for the Grey Havens. Elrond shows her a prophetic vision that if she waits for Aragorn, even if he succeeds in destroying Sauron and becomes King of Gondor, he will still succumb to mortality; Arwen will suffer grievously once he is dead and will be left to wither away...she reluctantly agrees to leave. Meanwhile back in Gondor, Frodo and Sam are taken to Henneth Annûn and brought before Faramir, where they learn their captor is the younger brother of Boromir. Sméagol eluded capture and, in order to save his life, is lured unknowingly into a trap by Frodo, bringing back his Gollum alter-ego. Faramir learns of the One Ring and, seeking to prove his worth to his father, decides the Ring shall go to Gondor.
On his way to Helm's Deep, Aragorn passes Saruman's army of Uruk-hai, which numbers at least 10,000 strong. His arrival is met with relief but it is short-lived with the news that there are only 300 men in the stronghold. He counsels Théoden to send for aid, but his pleas fall on deaf & despairing ears. At Fangorn forest, Treebeard and the other Ents, w/ Merry & Pippin along for the ride, hold a Council to decide on the role of the Ents in the war with Saruman. Back at Helm's Deep, every male old enough to hold a sword is called to service, & the women fall back into the fortress. Night falls, the defenders ready for attack; then, in the midst of despair, a battalion of Elven archers from Lórien, led by Haldir, arrives to assist in the ensuing battle.
The defenders wait on the walls as lightning reveals Saruman's massive army. In the pouring rain, an old man on the wall accidentally lets loose an arrow, killing an Uruk. The battle of Helm's Deep begins with a flurry of arrows from both human and Elven archers cutting down dozens of Uruk-hai. Scaling ladders are placed upon the Deeping Wall, and the Uruk-Hai swarm up to engage the defenders. Meanwhile, back at the Entish council, Merry & Pippin become frustrated by the slow progress. Back to Helm's Deep...The defenses are slowly being breached and the enemy manages to breech the wall through its sewer drain - which the treacherous Wormtongue told Saruman of - using a rudimentary explosive device created by the wizard. Despite Aragorn and Gimli's best efforts, the Uruk-hai manage to penetrate the main gate and soon the stronghold is overrun. In Fangorn, Treebeard and the other Ents have decided to not have any involvement in the war. In the midst of battle, Haldir falls in battle and the few remaining Elves fall back into the Keep. In the Hornburg,the Uruks have scaled the walls, and have breached the gate, forcing the defenders to also retreat into the Keep. Frustrated further by the Ents' decision to not participate in the war, Pippin cleverly takes Treebeard to the section of Fangorn Forest near Isengard that Saruman has decimated to build the forges necessary to make weapons for his army. Treebeard is filled with rage at Saruman's betrayal and commands all the Ents to seek vengeance. They gather and embark upon 'the Last March of the Ents' toward Isengard.
At the ruins of Osgiliath, Faramir talks of sending his father a great gift, the ring, to be used as a weapon that will help win the war. Sam tells him that the ring drove Boromir to madness & dishonor. Meanwhile, as the Keep is now under attack, and remembering Gandalf's words before he departed - of looking for him at dawn on the 5th day - Aragorn and the rest make one last gallant ride on horseback to attack the Uruk-hai army, in a desperate bid to allow the Rohirrim's women and children to escape into the Glittering Caves behind the Keep. As the riders are surrounded and all seems lost, Aragorn looks up to see Gandalf at the top of the tall hill before the fortress. With him are Éomer, and two thousand Riders of the Rohirrim; as they descend, the sun rises over the hill, blinding the Uruk army. In Isengard, the Ents attack, tossing stones and rocks while collapsing a dam to flood its surroundings and destroy the system of tunnels and foundries beneath it, while Saruman looks on frantically from his tower.
Back in Osgiliath, the Hobbits are confronted by a Ringwraith and its fell beast. With the help of Sam, & Faramir's well-aimed arrow, Frodo - who is feeling more & more the pull of the ring - narrowly escapes the Ringwraith's efforts to capture him. As we watch the army at Helm's Deep rout the evil army & the Ents succeed in demolishing Isengard, Sam narrates how the story must go on & they must finish their quest, regardless of the danger, b/c there is still good in the world & it's worth fighting for. Faramir hears & decides to free them.
Gandalf and the others now admit a full war is inevitable (as Sauron will surely seek retribution for the defeat of Saruman) and their only hope rests with Frodo and Sam, who have resumed their journey to Mordor. Accompanying them once again and feeling betrayed after his mistreatment by Faramir's men, Gollum's darker nature returns and decides to reclaim the ring by leading Frodo and Sam to "her".