Karen, Eason and Aubrey
Karen and Aubrey Davis' sick mother sends Audrey to Japan to bring her sister home since she is unable to do so on her own, given her current medical condition. Aubrey goes to the hospital in Japan, but initially can't see her sister due to the language barrier between the nurses and herself. Eason, a journalist who pulled Karen from the fire in the previous film happens to be at the desk and translates for her. Karen is at first unsure of Aubrey, but once convinced, she repeatedly asks her sister to get her out of the hospital. Orderlies strap Karen down to the bed, and when Aubrey leaves the room, her sister whispers, "Aubrey, don't go in that house."
The lights flicker in Karen's room. She struggles to get free when a hand grabs her right arm. Karen manages to get free and escape the guard and orderlies. After passing a group of medical staff and seeing Kayako, she ends up trapped in a hallway. The lights go out one by one, Kayako staggering towards her with the death rattle. Karen manages to get away and on to the roof of the hospital. She hears the death rattle once more and backs away to the edge of the roof. Kayako pulls Karen over the edge in time for Aubrey and Eason, who are leaving the hospital, to see her land in front of them dead. A horrified Aubrey collapses, while Eason sees Kayako clutching Karen's corpse.
Later, while Eason is in his apartment, he watches one of his interviews with Detective Nakagawa about the original family murder-suicide of the first film. When Eason rewinds and slows the tape down, he is able to hear Kayako's signature death rattle and see her face in the door. He starts taking notes but the television powers out as he is doing so. He then sees the reflection of Kayako, but when he turns around, she isn't there.
Eason goes over to Karen's apartment to see Aubrey. They talk and Eason explains Karen's behavior, only because he himself feels it. He knows the fire didn't solve the curse, but made it worse.
They go to the cursed house, and Eason tells Aubrey to stay outside the gate. Inside, Eason finds the closet, and inside there is nothing but Kayako's childhood diary. An unseen force flips it to a page with an eye. Outside, Aubrey hears Karen's voice asking her not to enter the house, but she does when Toshio's hand grabs her arm and pulls her in. Eason comes down and they leave.
Eason calls a friend who is more knowledgeable of folklore to understand Kayako's diary. They find out her mother was able to heal people by removing inhabiting evil spirits and feeding them to her daughter Kayako. Aubrey and Eason find a matching photograph and drawing of a torii outside the house where she grew up. The pair spend some time together at Eason's apartment, and when Aubrey falls asleep, he goes into his darkroom to look at pictures he took of the house's exterior. He notices a dark mass in one and develops another, an enlargement of that area. As it develops, the dark mass grows and the chemicals turn black. Kayako's head slowly comes out, and then leaps out and grabs him.
Aubrey wakes up in the morning and finds herself alone. She goes into the darkroom and finds the picture, then notices Eason's body in the corner. She embraces Eason's lifeless body, but he becomes Kayako and his arms wrap around her. Aubrey runs away as all the pictures in the darkroom show Kayako's face.
Aubrey takes a train and then a bus to Kayako's home. A man on the bus plays peekaboo with some unseen child, but Aubrey doesn't notice that the child is Toshio Saeki. She goes to the house and finds Kayako's mother, Mrs. Kawamata, who says that although she fed evil spirits to her daughter to heal others, she did not make Kayako what she is now (see Onryō). She explains that the events are not about the house, but making others suffer the way she suffered; there is no way to stop it. She then realizes that Aubrey had brought Kayako with her. Mrs. Kawamata staggers back and when she opens her eyes, Aubrey has become Kayako, who proceeds to walk towards her and Mrs. Kawamata dies.
Aubrey leaves and returns to the cursed house. She calls home and tells her mother Karen is dead. When her mother accuses her of not being "able to do anything on her own," Aubrey tells her she loves her, but her mother has to stop talking to her like that and says goodbye. She goes into the house and sees Karen go upstairs, calling for Doug. Aubrey follows her. Then suddenly, the house appears like what it was when Kayako lived in it. She then sees Takeo reading Kayako's diary. As Aubrey turns to run away, her ankle snaps and she crawls down the stairs, but is caught by Takeo who snaps her neck, exactly in the same way he killed Kayako. Comparison flashbacks from Kayako's death show exactly how she was murdered, and Aubrey is able to understand the pain Kayako went through as she shows her how she became evil. Just before Aubrey dies Kayako walks in from another room and looks down at her with her wide, staring eyes.
Allison (Arielle Kebbel) is a new student at the international high school in Tokyo, where she meets popular students Vanessa (Teresa Palmer) and Miyuki (Misako Uno). They take Allison to the Saeki House to play a prank on her. Miyuki sees the bath where Toshio was drowned; something stirs. The two girls tell Allison of the Saeki murders and then convince her to enter the closet Kayako and Toshio's bodies were stored in. Allison enters; the girls close the door. After Allison screams, the girls are unable to open the door. Allison is unable to exit the closet until she sees Toshio and then the ghost of Aubrey Davis.
Later, Allison is in class when she feels Toshio's cat brushing between her legs, and looks down to find Toshio curled in a ball at her feet and jumps up in a panic, humiliating her in class. Miyuki also feels Toshio's cat brushing against her legs but stays calm and looks back at Allison. All three girls deal with hauntings from Toshio, his cat, and Kayako. Miyuki then goes to a hotel with her boyfriend, where she finds Toshio in her bed, and Kayako pulls her into the mirror and kills her. Then, the counselor is confronting Vanessa about Miyuki's disapearence when she leaves the room, and Vanessa sees Toshio running across the room. She hides under the table where she is later killed.
Allison is again called to the counselor's office, where she says again that she and anyone who enters the Saeki house have been cursed and will be hunted down and killed by Kayako.The counselor tells her that she went to the house with the police, and there is nothing there. When Allison mentions Miyuki and Vanessa being killed, the counselor smiles and tells her that they are right next to her. The ghosts of Miyuki and Vanessa then appear on either side of Allison, who screams and falls to the floor. The counselor then turns into a ghost as well and advances on Allison making a loud moaning noise. Allison, completely horrified, runs out of the room screaming.
In Chicago, Bill Kimble (Christopher Cousins) has recently married a woman named Trish (Jennifer Beals), and is moving into the apartment he shares with his daughter, Lacey (Sarah Roemer), and son, Jake (Matthew Knight). While Lacey and her friend, Sally (Jenna Dewan), are friendly with Trish, Jake is distant. The young boy is troubled when the child of his neighbors, the Flemings, moves back in after going insane. At night, he is awakened by a series of loud knockings from the Flemings' apartment. Curious, he follows one of the apartments tenants and sees the person, who is wearing a hooded sweatshirt, getting old newspapers from the trash. When the person turns around to leave, Jake hides behind an object. He then notices two pairs of feet following the person out the basement. Jake looks out, only to see that there is no one behind the person. After Bill leaves for work, Jake and Lacey leave for school, and Jake notices that all of the windows in the Flemming's apartment are covered with newspaper. Bill, doubting his wife's fidelity, returns home unexpectedly under the pretense of having forgotten his keys, only to find Trish on the phone with a coworker she identifies as Nate. It is revealed that Bill is squeezing his keys so hard that they cut his hands, though Trish doesn't notice.
After school, Lacey decides to show off her cheerleader outfit to Sally, who appears ill (presumably due to the curse). Sally drinks a half a carton of milk then vomits the milk back into the carton, then proceeds to start drinking the vomited milk. Lacey returns home to find Jake shivering in his closet, afraid because Trish and Bill have been fighting. Jake is again awakened by pounding on the walls and, upon investigation, discovers his sweatshirt-wearing neighbor is a young woman who is banging her arm on the wall as she furiously cuts her own hair. After seeing the ghostly eyes of Vanessa and Miyuki staring in the window, Jake returns home and spends the night with his sister. That night, Toshio appears by Sally's bed as she dies in the same way as Jennifer Williams in the first movie.
The next morning, after Trish listens to the banging from next door, she begins to make breakfast in a trance. Bill, all this time having been influenced by the spirit of Takeo, accuses her of having an affair, but she does not respond. After Bill criticizes her for burning the bacon, Trish pours the oil from the pan onto his head before killing him with a blow to the head. Lacey and Jake return home to a dark and messy apartment while the banging from next door continues. As his sister looks for Bill and Trish, Jake discovers his father's body. Searching for Lacey, Jake finds that she has been drowned in the tub. As he hears Trish calling his name, Jake pulls back the shower curtain to find nothing. An already dead Trish appears in the tub, telling him it's time for his bath before Toshio pulls her under the water.
As Jake is fleeing his apartment, he hears screams from the Flemings' apartment. The girl in the sweatshirt turns out to be Allison, haunted by Vanessa and Miyuki, from the school in Tokyo. Jake accuses her of bringing something back with her which caused his family's death, and she confirms that "they" have followed her to Chicago. Allison sees Kayako climbing down the hallway stairs, and, shortly after, Jake sees Toshio inside the hood of Allison's sweatshirt. Kayako's hands emerge from the hood and pull Allison into her clothing, her body disappearing into it. Jake reaches for the sweatshirt as a ghostly hand grasps his arm; Kayako then rises from the hood and lurches towards him as the movie ends leaving Jake with his fate unknown.