Following the events of the first film, Stree leave Chanderi. Years later, Chanderi faces a new threat in the form of Sarkata, a headless ghost, who abducts women at night. The townspeople, unaware of this, mistakenly believe the missing women have left for better prospects.
Meanwhile, Rudra receives an anonymous letter containing missing pages from the book Chanderi Puran. A concerned Rudra warns Vicky about it, but is dismissed.
One night, Bittu's girlfriend Chitti is taken by Sarkata. A beggar who witnessed the abduction confirms the ghost's existence. She briefly appear to Vicky explaining Sarkata identity. Vicky, Bittu and Rudra investigates the torn pages of the Chanderi Puran and discover that Sarkata is the vengeful spirit of Chandrabhan, a former village head who was an alcoholic womanizer who hated progressive women.
He murdered Stree, when she was a courtesan, by beheading her and her husband, and burning them alive in front of her daughter. Stree returned as a spirit, beheaded Chandrabhan and his associates and buried their bodies. After Stree's departure from Chanderi, Sarkata has returned to target progressive women. Realising they need Stree's help to defeat Sarkata, the friends seek out Jana in Delhi, who was once possessed by Stree.
Jana, living with his cousin Bhaskar, is lured back to Chanderi under the pretext of a stage play. He reluctantly agrees to assist them. While searching for Stree at the old fort, Sarkata attacks and drag Jana to his lair, while his mortal body is unable to pass through the rock wall, his spirit is taken and Jana find the abducted women, who are held captive in Sarkata lair.
The group narrowly escape the fort with Sarkata in pursuit. She reappears and saves the group by fighting Sarkata using the powers of Stree's braid attached to her hair. The town women, living in fear, blame Vicky for defeating Stree, which they believe led to Sarkata's emergence. They pressure Vicky to take responsibility for the new threat.
She convinces Vicky that his pure soul makes him the right person for the task. She gives Vicky a magical dagger and instructs him to use it to slice Sarkata's head.
The group decides to lure Sarkata by organising a provocative dance performance by Shama, Rudra's former lover. During the performance, Sarkata appears, but Vicky is unable to decapitate him. Sarkata possesses all the men protecting Shama, and subsequently abducts her. All the possessed men, including Bittu, begin controlling the town's women.
Desperate for a solution, the group follow a clue from the anonymous letter to a psychiatric hospital, where they meet a descendant of Sarkata. The man reveals that Sarkata can only be defeated by a being who is neither man, woman or animal. With this knowledge, She briefly merges her body with Vicky, creating a being capable of entering Sarkata's lair.
Inside the lair, Vicky and She confront Sarkata. Vicky cuts Sarkata's head in half with the magical dagger, but each severed head regenerates into multiple new heads. As they are overwhelmed, Bhaskar arrives and aid in their fight. However, Sarkata overpowers them.
In a final attempt, She calls out to her mother, who is revealed to be Stree. Stree arrives and, with Vicky's help, defeats Sarkata by dragging him into lava, destroying his mortal body. The abducted women are freed, and the possessed men in Chanderi are released from Sarkata influence. Vicky and his friends are celebrated as heroes.
She reveals to Vicky that she is a ghost and that she only came to Chanderi to make her mother's spirit reach salvation. She assures him that she still values their friendship and promises him that they will meet again and leaves.
In a pre-credit scene, Bhaskar asks Jana to set him up with She. Jana declines, but Bhaskar continues to plead. Bhaskar informs Jana about a new threat in Delhi about a man sucking blood out of people's neck, referencing a vampire. In a mid-credits scene, a mysterious pot containing Sarkata's remains reaches the mental asylum, and possesses his descendant.......
