The film starts in Rome, where two assassins on motorcycle are chasing Justin Bieber (playing himself) through the streets. The singer kills one of the villains before heading to the home of Sting for sanctuary, but nobody comes for him. Justin is cornered at gunpoint, but he tells the assassin that they will be stopped. The villain pumps him full of lead before disappearing into the night. With his last breaths, Justin takes a selfie while making the "Blue Steel" look. He looks for the perfect filter before sharing and then dying.
The Fashion Division at Interpol receives Justin's selfie, which is another in a series of final selfies left behind by other recently-murdered celebrities, like Demi Lovato, Usher, Lenny Kravitz, and Ninja from Die Antwoord, all of whom flashed the "Blue Steel" look before dying. Spanish Interpol Agent Valentina Valencia (Penelope Cruz) declares that there is only one person who can understand what this means, but nobody has seen him in years.
We are treated to a recap of the last 15 years. Derek Zoolander (Ben Stiller) was once the hottest male model, until his life began to take a turn for the worse. After opening 'The Derek Zoolander Center for Kids Who Can't Read Good and Who Wanna Learn to Do Other Stuff Good Too', the facility collapsed due to the fact that it was constructed using the same materials used to make the tiny model of the place. The collapse killed Derek's wife Matilda (Christine Taylor) and disfigured his best friend Hansel (Owen Wilson), destroying Hansel's modeling career. Derek is left alone with his son, Derek Jr (nicknamed DJ), but he loses custody after going crazy when he fails to make spaghetti. Derek then announces his retirement from modelling to go become a "hermit crab".
Derek lives in a cabin in a part of New Jersey that contains blistering cold weather. He is unexpectedly visited by Billy Zane with an invitation from the current hotshot of fashion, Alexanya Atoz (Kristen Wiig), to join a fashion show in Rome run by fashion icon Don Atari (Kyle Mooney). Derek refuses to return to the outside world if it means not being able to be with his son. Billy encourages him to go back out there and try to get DJ back.
We find Hansel living in the desert (or "Uncharted Malibu Territories") with a random group of strangers that he calls his "orgy". He receives a shock when he learns that ALL the members of the orgy are pregnant... including Kiefer Sutherland. Frightened by the concept of parenthood, Hansel abandons the orgy and runs into Billy, who presents Hansel with the same invitation from Alexanya.
Derek and Hansel are reunited in Rome, but Hansel is still pissed at Derek for ruining his career. The two of them are escorted to the location of the fashion show by an adult-faced child called VIP (Fred Armisen). The two meet Don Atari, an annoying hipster, plus the hottest fashion icon of the moment, All (Benedict Cumberbatch), whose gender is a mystery to Derek and Hansel.
The two participate in Atari's fashion show, where they have to wear tacky red jumpsuits that say "Old" and "Lame". All descends from the ceiling in a demonic outfit to whip Derek and Hansel before they have a massive barrel of prunes dumped on top of them. Humiliated, the two leave until they are approached outside by Valentina. She asks that they join her at Interpol to determine what is happening to the beautiful people of the world, and she promises to help Derek find his son.
At Interpol, Valentina shows Derek and Hansel the selfies of the dead celebrities and asks if they're all "Blue Steel". Derek explains that all of his looks, despite seeming similar, have slightly different characteristics to set them apart (basically just how he arches his eyebrows). The look they did is similar to one he did for a weird water ad with Naomi Campbell called Aqua Vitae. We see the ad featuring Derek as a half-man/half-cow that gets milked. The computer deciphers Aqua Vitae to mean "fountain of youth." Valentina also locates DJ, stating that he lives in an orphanage right there in Rome.
Derek and Hansel go to the orphanage and see some kids playing soccer. Derek spots one boy with similar hair to his that sort of flashes one of his own looks. Thinking this is DJ, he goes over to the field, only to discover that a chubby little boy in the group (Cyrus Arnold) is really DJ. Horrified at having a fat son, Derek wants to walk away, but Hansel convinces him to stick around and catch up with the kid. Derek takes a look in the fountain and sees a vision of Matilda telling him to be with their son, and to watch out for the headmaster, who is really the Evil Breakdancing DJ (Justin Theroux) in a wig that only fools someone as dumb as Derek.
Derek takes DJ out for gelato, but he screws up when he takes a selfie while driving and causes the car to flip violently across the street. DJ takes a cab back to the orphanage, telling Derek he wants nothing to do with him and that Matilda made a mistake falling in love with him.
Meanwhile, Hansel has found a new orgy, which includes Christina Hendricks, Susan Sarandon, Ariana Grande (in bondage), and a baby hippo. The other orgy finds them, and they are all heartbroken... especially Kiefer. Hansel takes to the rooftop to wonder who he is, just like Derek is across the street, along with Katy Perry and Neil Degrasse Tyson on the other side. Valentina then shows up and tells the guys to rejoin her.
The three go to the home of Sting to learn from the man himself that in the beginning, God created Adam and Eve...and Steve, the world's first male model. Apparently, he had a looked called "El Nino", which was so powerful that any body of water he looked into could not reflect his beauty back to him. It is said that descendants of Steve have been killed through the centuries to find the Fountain of Youth and obtain eternal beauty, and it turns out that DJ is the last descendant. Derek, Hansel, and Valentina return to the orphanage and find it empty. Derek realizes that the headmaster was the Evil DJ, meaning that the real mastermind behind all of this is his old nemesis, Jacobim Mugatu (Will Ferrell).
Mugatu is kept locked up in a top secret fashion facility for the worst fashion criminals, including MC Hammer and John Malkovich. Mugatu is strapped to a chain with no use of his arms. He manages to trick Derek into switching places with him and then proceeds to escape easily since all the guards are idiot male models.
Mugatu goes to the House of Atoz to meet with Alexanya, his accomplice. Don Atari is there too, but after getting sick of listening to him, Mugatu snaps his neck with his feet. Little does he know that Hansel has followed him to gather intel. He reports to Valentina, who has gotten Derek out. The two swim back to Rome like torpedoes.
Mugatu has DJ locked up in a room to fatten him up, as he has been doing for years since he ran the orphanage from prison and made sure that the boy got fat to prepare him for this day. Hansel shows up after Mugatu leaves and tells DJ that his father is coming to look for him because he loves him and really wants to be with him.
Derek and Valentina arrive at the location of the sacrifice to find fashion superstars like Tommy Hilfiger, Anna Wintour, Kate Moss, Marc Jacobs, and Alexander Wang all gathered for the ceremony. Mugatu prepares to sacrifice DJ until the heroes arrive to stop him. Mugatu is forced to admit that there is no Fountain of Youth, but he just wanted to get all the people in fashion that shunned him and to kill them all, and that he is only trying to kill DJ because he hates Derek. Mugatu also admits that it was his company that constructed the reading center, and therefore it was he that was responsible for Matilda's death. Mugatu hurls his ceremonial knife at DJ. Derek steps in and tries to use "Magnum" to stop it like before, but the knife goes through his cheek. Mugatu opens the floor to reveal a pool of lava beneath them, and a bomb that he plans to throw in to kill everyone. Alexanya then arrives to fight Valentina. She pulls off Alexanya's face to reveal that she is Mugatu's other accomplice Katinka (Milla Jovovich). The two of them have a sexy fight that makes all the straight men in the room stare. He drops the bomb, but Derek regains his "fire" and uses Magnum to hold to bomb. It starts to slip, until Hansel uses his own look to stop it, along with Sting, who comes out of nowhere to reveal that he is Hansel's father. The three of them cannot hold it, so DJ (had it being called fat) steps in and unleashes "El Nino", to the amazement of everyone. Together, they hurl the bomb at Mugatu, which explodes and kills him, releasing confetti everywhere.
Derek and Valentina come together, having been attracted to each other for a while, but Derek hasn't been able to move on from Matilda. Her ghost reappears and gives him her approval, since she's dead and nothing can bother her. She also tells Derek that Mugatu live-streamed the event around the world, giving Derek and Hansel the popularity they've missed for so long. They get excited and have a "lava pool party".
The epilogue shows that after Derek and Hansel underwent lava treatment, their facial scars were removed, and they made a successful return back to the modeling world. Derek and Valentina married and had their own daughter, who develops a look of her own. They also started a new center of their own for 'Girls That Want To Be Models, But Also Want To Transition Into Law Enforcement'. Hansel becomes a father to all the children in his orgy. DJ becomes a world famous plus-size model and is part of a power couple with Malala Yousafzai.