The film begins in England. At a local museum, a tour guide is showing a group to the Magna Carta. When they arrive, they see that the Magna Carta is missing. The only thing left is a card that says: "The Tornado."
In Italy, a monk is showing people where the Shroud of Turin is stored in the church, only to discover that it to has been stolen. There is a card that reads: "Il Tornado (The Tornado)."
In Japan, the police arrive after discovering that an artifact has been stolen from a museum. Again, there is a card that reads "The Tornado" in Japanese.
Finally, we arrive in France. Chief Inspector Dreyfus (John Cleese) arrives at the office of the head of Government. The governor of France informs Inspector Dreyfus that England, Italy, and Japan are assembling a dream team of detectives to help recover the stolen treasures, but they will need help from other nations. This includes France. Inspector Dreyfus assumes that he is the detective that will represent France, but is disappointed when the Governor tells him that Clouseau has been chosen to lead the dream-team since he has been considered the greatest detective in France, after recovering the Pink Panther diamond. Dreyfus calmly gets up and steps into the bathroom. Moments later, he begins throwing a fit about Clouseau. He returns to the Governor's office and says that Clouseau cannot be assigned to the dream-team, because he already has an important job.
It turns out; this "important job" is nothing of that sort. Inspector Jacques Clouseau (Steve Martin) is simply a parking officer, in charge of leaving tickets and such. When he sees that a car is parked only little ways from a parking meter, Clouseau writes up a ticket. The driver arrives and feels that the ticket isn't needed, gets in his car and tries to drive away. Clouseau won't have it and chases the car so he can hand the ticket to the driver. As he tries to stick his hand through the window, the driver rolls up the window and crushes Clouseau's hand, but Clouseau won't give up, even though the car is now dragging him. When Clouseau demands that the driver stop the car, the driver slams on the brakes and sends Clouseau flying through the air and past the Eiffel Tower.
We are then treated to an animated opening credits sequence.
After the opening credits, we see Inspector Dreyfus arrive at his office where a new security system has been installed to protect France's greatest artifact, The Pink Panther diamond. Inspector Dreyfus tells his assistant that Clouseau has been assigned to the Dream Team. Before the assistant can question him, Clouseau arrives. Inspector Dreyfus is clearly jealous as Clouseau shows off his medal that the Mayor of France had given him for recovering the Pink Panther. As Inspector Dreyfus is about to speak about The Dream Team, Clouseau lunges his pen at a security camera and then another, and then he cuts a hole in Inspector Dreyfus' portrait and removes the recording equipment which is part of the security system. Soon, the police arrive and attack Inspector Dreyfus, thinking he is a criminal. They demand to know the password. Thankfully, Clouseau has the password and the police leave. The password was "Hamdburger" but Inspector Dreyfus pronounces the word "Hamburger" instead which results in an argument about the pronunciation of the password.
After the argument, Inspector Dreyfus wonders how Clouseau knew the password. It turns out that Clouseau has a special system installed into his medal, all he has to do is type in certain things and the password is revealed. He also shows off his tape-recorder/pen. Inspector Dreyfus tells Clouseau that he has been assigned to the Dream Team, but Clouseau feels that he should stay behind because of the recent thefts and he fears that the Pink Panther will be stolen next. Inspector Dreyfus says that he is guarding the Pink Panther. Clouseau still argues with him, before Inspector Dreyfus says that he is giving him an order. Clouseau, never going against direct orders, agrees to the plan with a firm salute.
Back at Clouseau's office, Clouseau is packing for the trip when his secretary, Nicole (Emily Mortimer) arrives. Nicole is disappointed when she sees Clouseau's plane tickets for Japan, and wonders when he will return. Clouseau says he doesn't know when he will return, which upsets Nicole. Clouseau says that he can't stay in contact with Nicole, and says that, for awhile, they must forget each other and that one night they had spent together. Cut to six months (or weeks) ago, Nicole and Clouseau are in Rome together at a restaurant called "La Plata de Nada." It seems they are just out for dinner for business only, and don't think that any romance will happen. Clouseau leaves the table to select a wine, but only manages to send a dozen wine bottles flying all over the place, nearly hitting customers and sending the place into chaos. Things only get worse when Clouseau sets the restaurant on fire. By some twist of fate, it sparks a romance between Nicole and Clouseau. Back in the present, Nicole and Clouseau agree to forget that night and each other for the time being. They attempt to hug goodbye, but are caught off guard when Clouseau's fellow detective and friend, Gilbert Ponton (Jean Reno), arrives to fetch Clouseau. When they go to the car, Clouseau says that he is ready to drive, and Ponton agrees but seems a bit skeptical.
For awhile, the car ride goes well. Until, Clouseau decides to discuss his relationship with Nicole and accidentally lets go of the wheel. Leaving an extremely nervous Ponton to take control of the wheel and assure Clouseau that everything will work out. When they arrive at the airport, Ponton mentions that his anniversary with his wife is coming up and says that things haven't been going well between them. Ponton says they had argued about his work, because Ponton seems to put it before his family. Clouseau tells Ponton to not give into his wife's nagging and continue to put his work first. Ponton and Clouseau say goodbye, but just as Clouseau steps over the yellow tape, the Pink Panther is suddenly stolen.
Clouseau remains in France, and the Dream Team is flown in. When Clouseau arrives at the scene of the crime, he sees Nicole but pretends not to know her, which makes Ponton wonder.
Ponton and Nicole follow Clouseau where they meet the Dream Team. There is: Miles Pepperidge from England, Vincenzo from Italy and Kenji from Japan. It seems that Clouseau has a hard time pronouncing Vincenzo's full name, which makes Vincenzo a bit annoyed. It also seems that Vincenzo is smitten with Nicole.
As Pepperidge begins to deduct the crime scene, Clouseau tries to outdo him, which results in an argument. Soon, the Dream Team adds another member named Sonia; she is a second-rate detective from India and very alluring. Nicole can't help but notice the attraction between Sonia and Clouseau.
Later on, Vincenzo admits to Clouseau that he is attracted to Nicole, Clouseau, remembering to protect Nicole, says he isn't interested in Nicole because she is drab and disgusting. Vincenzo disagrees and walks away from Clouseau.
As everyone is setting out to leave, Clouseau refers to Kenji as his "little yellow friend." Kenji seems highly offended. Clouseau is sent to the team's etiquette teacher, Mrs. Berenger (Lily Tomlin). Berenger tells Clouseau that he shouldn't have called Kenji that. When Clouseau asks why, Berenger informs him that it is a stereotype. Clouseau seems to shrug it off. In an effort to break Clouseau of his stereotypical remarks, Berenger turns the conversation towards women. She asks Clouseau to pretend that she is a sensual woman with exposed cleavage, and says that Clouseau's expression during the charade must remain neutral. Berenger pretends she is picking up a pencil, but by the end of it, Clouseau looks a bit horny. Clouseau says to Berenger that he likes her. Click Here!
At the airport, everyone arrives at Vincenzo's private jet. When the team wonders about the pilot, Vincenzo says that he is the pilot. Vincenzo says that he wants Nicole to be his co-pilot, and Nicole agrees. Aboard the jet, Clouseau watches as Vincenzo and Nicole flirt with each other. Sonia, however, has intentions of flirting with Clouseau, and tries to convince him that Nicole is most likely interested in younger men like Vincenzo. Sonia also admits to Clouseau that she is more interested in older men, like Clouseau. Nicole turns her head and sees Sonia and Clouseau getting chummy, Vincenzo speaks of what Clouseau had said to him about Nicole being drab and disgusting. Offended by Clouseau, Nicole begins to drift away from him and closer to Vincenzo.
The team arrives in Rome to see one of the suspects, Alonzo Avellaneda, a blacksmith who is often associated with The Tornado. Clouseau tells Nicole that he is going to sneak around, but Nicole doesn't seem to mind him. As the Dream Team interviews Avellaneda, they can see on the security monitors that Clouseau is making a complete fool of himself. In an effort to keep Avellaneda distracted, the Dream Team keeps hitting him with questions. They even force him to remove his shirt, as the Tornado is known to have a bullet wound in his right shoulder. Pepperidge examines both of the shoulder blades, but can see no sign of the wound. Clouseau then makes his entrance by sliding down the chimney and accusing Avellaneda.
Later on, Pepperidge, Vincenzo, and Kenji are outside with Clouseau and trying to convince him that Avellaneda is not The Tornado because he has no wound. Clouseau suggests that perhaps Avellaneda had plastic surgery to cover it up. Seeing no sense in arguing, the Dream Team, Clouseau, Ponton and Nicole pack up and leave the home. Avellaneda gives the all-clear, and the real Tornado steps out of a room. As the Tornado goes by the window, he says that he once knew one of the detectives but he won't say whom.
Clouseau gets a tip that Avellanda and a lady-friend will be dining at La Plata De Nada that night. So, Ponton and Clouseau watch the restaurant from across the street, they have already planted a bug under Avellanda's table so they can hear the conversation. However, Clouseau is taken by surprise when he sees Nicole and Vincenzo at the restaurant together and being very friendly with one another. Fearing that Nicole is cheating, Clouseau tells Ponton that they have to move the bug over to Nicole and Vincenzo's table. Ponton wonders how they could manage that. Clouseau sees one of the dancers for the restaurants entertainment is going through the back door; he attacks him and steals his costume. Since the costume includes a mask, nobody recognizes Clouseau. While making the effort to move the bug, Clouseau's dancing causes trouble and he, once again, manages to burn down the restaurant.
Once outside, after the fire, Ponton points out Nicole to Clouseau. Nicole takes one look at Clouseau, and begins to cough; Vincenzo who escorts her off the premises comforts her. Clouseau seems highly disappointed.
Later in the night, The Tornado sneaks into the Papal Palace and steals the Pope's ring as he sleeps.
The next morning, the Dream Team arrives at the Papal Palace and the Italian reporters question Pepperidge. After dealing with the press, the Dream Team goes to see the Pope. Vincenzo kisses the Pope's hand and assures him that he will find the ring and return it to him. The Pope tells him to have a seat, but Clouseau steals the seat. Clouseau begins to make assumptions that perhaps the Pope himself stole the ring to gain money, but the Pope denies the accusation. In order to investigate, Clouseau thinks he should place himself in the Pope's position. Literally. After dressing in the Pope's robes, Clouseau steps onto the balcony but ends up tumbling off it. Making him the center of the news.
The Dream Team travel back to France but Clouseau gets an unexpected surprise when Pontons two boys, Antoine and Louis, attack him. Clouseau tries to show the boys how to do a surprise attack, by attacking a sleeping Ponton. However, Clouseau is the one taken by surprise when Ponton kicks him and sends him crashing into the coffee table. Soon after, their mother picks up Antoine and Louis, Ponton seems upset as he kisses his sons goodbye. Clouseau tries to cheer him up and tells him that he should be happy to be a bachelor again. He asks Ponton how they should celebrate singlehood. Of course, both being middle-age men, the only fun thing they are able to do is shampoo each other's hair. Clouseau reads the shampoo bottle but has a hard time pronouncing the name of the shampoo, Ponton tells him the correct pronunciation. They find the actual Shampoo brand name amusing, and make a song about it. Only seconds later does Ponton decide that he has to go back to his wife and sons. Clouseau says that work should always come first, but Ponton disagrees and says that he now realizes that love and family should come before work with no expectations. Ponton says that when you are in love, that you may not even know it, he uses Nicole and Clouseau as an example. Ponton says that he knows that Clouseau loves Nicole but refuses to see it; he says that when a man loves a woman than the man should be able to know everything about the woman. When Clouseau doesn't respond, Ponton begins to leave but Clouseau suddenly speaks about Nicole. He says that Nicole loves the smell of Vanilla and that she loves her cats Wendy and Louise (there was a third cat, but I forgot its name), he also says that Nicole is the most beautiful woman in the world but she doesn't believe it. Ponton asks Clouseau why he never tells Nicole that she is beautiful, Clouseau admits that if he tells Nicole that she is beautiful then she will leave him. Wanting to be consoled, Clouseau hugs Ponton. Unfortunately, Ponton is left with a big shampoo smudge on his cheek.
At the main headquarters, Vincenzo and Kenji and Pepperidge are extremely angry about Clouseau's stunt at the Papal Palace. Sonia says that she likes Clouseau and wants to keep him on the case, but the boys disagree. With a show of hands, Clouseau is voted off the team. Clouseau arrives and raises his hand when he sees that the boys have their hands raised. Vincenzo informs Clouseau that they were just voting Clouseau off the team.
Upset, Clouseau returns to his office later but finds Sonia there as well. It turns out, that Nicole has quit and Sonia was just cleaning out her things. Seeing that Clouseau is extremely vulnerable, Sonia takes advantage and says that she knows how it feels to be rejected. Clouseau peeks his head out of the office to be sure that Mrs. Berenger is nowhere to be found; afterwards he goes back to Sonia and says that she is "sexy" and extremely attractive. Clouseau and Sonia share a hug and Nicole walks in on them, but becomes upset and leaves. Berenger pops her head inside of the office and says that she wants to see Clouseau soon.
Later on, the Dream Team is on the scene of a suicide, the Tornado's suicide. Clouseau arrives, apparently ignoring that he has been kicked off the team. The others say that he should leave because the case has been closed because of the Tornado killing himself. Clouseau wants to see the stolen artifacts and Kenji shows him the crates that are filled with the artifacts. Clouseau is worried when he can't see the Pink Panther. Pepperidge tells him that it was the only thing they couldn't recover. Clouseau tells everyone that the case won't be closed because the real Tornado hasn't been caught. Everyone tries to convince him, Sonia evens reads a suicide note written in the Tornado's hand. Clouseau says that until the Pink Panther has been recovered, then the case is still unsolved. Seeing no sense in arguing with their team member, the Dream Team attends a press conference and announces that the case is officially closed, but Clouseau makes his opinion known. Clouseau is angered when Vincenzo says that the real thief is Nicole, because she has stolen Vincenzo's heart. The press finds this romantic, but Clouseau doesn't seem amused.
Later on at a banquet to celebrate the Dream Team's success, Clouseau has been placed on parking duty again. Nicole goes outside and brings Clouseau something to eat, and Clouseau thanks her. Nicole, no longer able to control her anger, confronts Clouseau about why he called her drab and disgusting. Clouseau says he was only doing it to protect her and that he really believes she is beautiful. Nicole, upset and confused, runs back inside. Sonia pulls up in her rental car and informs Clouseau that she is leaving France; Clouseau bids her farewell as Sonia steps inside to join the others. As Clouseau stands outside, he sees the license plate on the back of Sonia's rental car, and realizes the truth. He runs inside and takes Inspector Dreyfus aside and says that he knows where the Pink Panther is. The Dream Team watches from afar as they see Inspector Dreyfus arguing with Clouseau. Inspector Dreyfus returns to the table and says that Clouseau believes that the Tornado is really Sonia. The Dream Team laughs it off and, as a joke, try to figure out how Sonia could have done it. When they produce an actual theory, Nicole seems extremely suspicious. The others just think of it as a game, and don't believe Sonia is capable of stealing all those artifacts. Sonia gets up to leave but Nicole asks her to empty her purse, Vincenzo tells Nicole that it was only a game. Nicole says they should finish the game by letting Sonia empty her purse, now even the Dream Team is suspicious. Sonia pulls out a gun and holds it to Nicole; Clouseau arrives on the scene to stop Sonia.
Sonia leads Pepperidge, Clouseau, Kenji, and Vincenzo on a chase through the building. They come to a hallway, Sonia pours gasoline all over the hallway and uses her gun to set the hall ablaze. The Dream Team and Clouseau manage to put out the fire, but manage to get covered with cake and flower after crashing with a few dessert trays. Sonia, in an effort to escape, shoots the Pink Panther and the sparks fly all over the building. As Sonia runs to escape, her head is dented when she bumps into a metal tray that was being held up by Ponton. Sonia is arrested, but everyone despairs because the Pink Panther has been destroyed. Clouseau calls in Antoine who is holding a case, which reveals the real Pink Panther diamond. Clouseau says that when he feared that the Pink Panther would be stolen, that he took the real Pink Panther and replaced it with a replica. Vincenzo observes Nicole and Clouseau, and realizes that he loves Nicole far too much to watch her suffer. Vincenzo tells Clouseau that Nicole loves him and that nothing happened the night that the restaurant was set on fire. Clouseau professes his love for Nicole and gets on one knee and proposes marriage.
On the day of Nicole and Clouseau's wedding, the entire Dream Team (with the exception of Sonia) is present and Inspector Dreyfus is performing the ceremony. After the kiss, Clouseau tosses his pen again at a security camera and the police arrive again. They once again force Inspector Dreyfus for the password, but Clouseau's gadget has a glitch. Clouseau and Nicole rush away, and Nicole tosses her bouquet. In a surprise twist, Pepperidge catches the bouquet. The film ends as the ceremony goes into complete chaos with cake flying and machine guns going off. Suddenly, the animated Pink Panther enters the wedding room and winks at the camera. The end.