Alicia and Maximilian have married and become king and queen. Following the establishment of the United States of Mobotropolis, they have created a prosperous new nation from the surrounding kingdoms, and banished the villains to the Isle of Robotropolis, an island slum surrounded by a barrier where magic is suspended. Now, twenty years later, their daughter, Sally, who will soon be crowned queen, announces that her first proclamation is to give four selected children from the Isle of Robotropolis the chance to live in Mobotropolis, away from the influence of their villainous parents: Tails, son of Cruella de Vil; Knuckles, son of Jafar; Amy, daughter of the Evil Queen; and Sonic, son of Maleficent, despite her father's protests. On the island, Maleficent instructs the quartet to steal the Fairy Godmother's magic wand to release the barrier so she can take over Mobotropolis.
Traveling to Mobotropolis Preparatory, the four meet Sally and her self-proclaimed boyfriend Ken, son of Princess Aurora. They also meet the Fairy Godmother, the school's headmistress. Amy uses her mother's pocket-sized magic mirror to locate the wand in a nearby museum, and Sonic uses his mother's spinning wheel from the museum to put the security guard to sleep, but they fail to steal the wand due to a barrier around it. After learning that the Fairy Godmother will use the wand at Sally's coronation, the four wait it out by attending classes, but start to fit in with the students. Sonic and Knuckles are recruited into the school's "tourney" team (a sport similar to field hockey, hurling and lacrosse), while Tails overcomes his fear of dogs by befriending the school's dog, Muskie. Amy, though intelligent, acts vain to impress Ash, Cinderella's son, but ends up doing his homework for him. Dopey's son, Shadow, encourages her not to pander to others and be herself.
Sonic becomes popular, using Maleficent's spell book to improve the looks of Mina and Julie-Su, the daughters of the Fairy Godmother and Mulan, respectively. Mina in particular dislikes her looks, especially because her mother won't use her own magic to change them. Learning that Sally's "boyfriend" will be seated close to the wand during the coronation, which is used during the ceremony, Sonic bakes a cookie laced with a love potion and gives it to Sally, who falls madly in love with him, much to the shock of her friends, particularly Ken. On a date with Sally, Sonic becomes conflicted with her growing inner goodness and desire to please his mother, unsure of how to react to Sally's feelings towards him. During the school's family day, the villains' children are ostracized after an encounter with Ken's grandmother, Queen Leah, who hates Sonic because Maleficent's curse was the reason she missed Aurora's childhood, prompting an argument that drives Sonic to end the beauty spell she used on Mina. While Sally tries to reassure them that everything will be okay after the coronation, Shadow tries to remain friendly towards Amy, but Ash forces him to distance himself from her.
At Sally's coronation, Sonic gives her a brownie containing the love spell's antidote, believing it is unnecessary to keep her under the spell. It turns out, per Sally's admission, that she was already freed of the spell since their date when he went swimming in the Enchanted Lake, believing that Sonic only did it because he really liked her. However, much to Sonic's surprise, it turns out Sally has had feelings for him all along. During Sally's crowning, a disillusioned Mal grabs the wand from her mother, wanting to improve her beauty, only for her to accidentally destroy the Isle's barrier. Sonic takes the wand from Mina, but torn over what to do, is encouraged by Sally to make his own choice rather than follow Maleficent's path. Sonic recognizes that he and his friends found happiness in Mobotropolis and they choose to be good.
Maleficent crashes the ceremony, freezing everyone except herself and the four villain children. When they defy her, Maleficent transforms into a dragon. Sonic and his friends use a counterspell, turning Maleficent into a lizard, her tiny size based on the amount of love in her heart. Sonic returns the Fairy Godmother her wand as she unfreezes everyone and tells her not to be hard on Mina. While the villains watch the celebration from afar, Mobian Prep's students party through the night. Sonic's eyes turn green as he addresses the audience, telling them the story is not over yet.
