 
The film picks up a few days after the events of the first film. Paul wakes up in the creek surrounded by bloody water. He is severely infected and he is covered in sores and boils. He begins walking through the forest as his skin begins to fall off. He makes it to the highway and is hit by a bus full of high school students, completely dismembering his body into an unrecognizable mess.
Winston, the cop from the first movie, comes to investigate the crime scene and tells the bus driver he hit a moose. The bus driver drives away to the high school. Winston finds Paul's foot in his shoe hanging from a tree. Winston, disgusted, drives away from the scene.
Through an animation sequence you find out that the creek Paul was lying in was connected to a bottled-water company and the infected water was distributed into bottles of water and brought to the high school of the kids on the bus.
In the school the lunch lady distributes the infected water for the kids to drink. John, a senior at the high school, is deciding whether to go to prom with his long-time crush Cassie or stay home and watch a horror film with his friends. His friend Alex is totally against going until he hooks up with a girl named Liz. Eventually after Liz gives Alex oral sex, he asks Liz to prom. She then says she has to get off work and that she'll meet him there.
John asks Cassie to go to prom but Cassie refuses. He is convinced to go by Alex because Liz might go. Meanwhile, Winston is at a restaurant where a worker from the bottled-water company that distributed the water dies from the infection. He then realizes that dumping Paul in the creek got heavily contaminated. He goes to the water plant and has one of the workers there tell the officials that the water is contaminated. The worker is then killed by a group of CCD (Contamination Control Division) soldiers. Winston leaves before they can get to him.
At the high school the infection begins to spread to the students. First was Rick, a popular student who ditches his girlfriend, Sandy, at the prom. He later seduces an over-weight student Fredricka because of a bet. She had just finished making a punch with the contaminated water. They go to the pool and begin to have sex in the pool. She then begins to succumb to the infection. Rick panics and gets out of the pool. Fredricka screams as she begins to drown. Rick tries to save her by using a pool strainer. She pulls on it and pulls Rick in. He hits his head on the side of the pool and bleeds to death. Fredricka drowns.
At the prom Alex is disappointed that Liz didn’t come. The mean girl in school Sandy complains to Principal Sinclair that she can't find Rick and screams that since she is the prom queen everything should go her way. Ms. Hawker, a mean teacher at the school, then slaps Sandy. John finds out Cassie is there with her boyfriend Marc who John hates. The two begin to fight. The principal splits them apart and kicks John out of the prom. Cassie follows him trying to calm him down. He confesses his love to her. CCD then force the two back into the school. The CCD locks all of the main exits from the school. The two become worried and go back to the gym to warn the principal of the lock down. They go through the pool where they find Fredricka's rotting body floating in it.
They find the principal and get Alex out of the gym. The principal demands to know what is going on with the lock down but the CCD shoots him in the head. The infection then begins to spread and kill the students in the gym at an alarming rate. The gym is then gassed from the outside. Cassie, John, and Alex watch in horror as the students try to get out of the gym but to no avail. All the students including Sandy die in the gym. Winston is waiting outside a liquor store and is picked up by his cousin Herman (Mark Borchardt) who is at first reluctant about leaving town but Winston convinces him by giving him a grin (implying that they are going to Mardi gras because of an animation at the end of the film).
They try looking for an exit to the school. Alex storms off after finding out he is infected with the disease. He goes to the library to find out what it is. Cassie and John decide to go out through the auditorium.
They try to find Alex while evading the CCD who are wearing bio hazard equipment. They find an infected Ms. Hawker who is killed by soldier. They go to the library were they find Alex. They also discover that the disease is necrotizing fasciitis and incurable. Alex says the only way to stop the infection is to cut off the limb the infection is on. He dies moments later with John and Cassie distraught. John finds a boil on his hand and he knows he is infected with the disease. He and Cassie go to the wood shop room where Cassie cuts off John's hand to stop the infection from spreading and uses an acetylene torch to stop the bleeding.
Winston and Herman are near the city limits when a police roadblock prevents them from going any further. After failing to convince the officer to let them leave, Herman knocks him unconscious and they drive away.
Cassie's boyfriend Marc then comes out of nowhere and tries to kill John. Cassie kills Marc with a nail gun. The two leave the school only to be ambushed by the CCD. John stalls them allowing Cassie to escape from the school area. She finds herself on the highway and stops Herman's van. Winston and Herman take Cassie with them, not knowing she is infected.
The end of the movie shows Alex's date with Liz at her work place. She is a stripper at a strip club. She is also infected and she has sex with a customer at the club. He then becomes infected and begins to spread it around his work. His friend who had sex with her co-worker also becomes infected, spreading to others on his trucking route to New Orleans along with two Mexican men who go back to Mexico also infected. Liz then goes home sick and wishes she went to prom instead of work.
After the credits Daryl and Dane are shown watching a movie and Dane says "prom blows"