Several years after the events of "An American Tail," the Mousekowitz family still resides in New York, but times are tough, and the promise of "streets paved with cheese" has not come to pass. Papa and Mama's children have also grown up since the last film, with Fievel idolizing cowboys out west (like famed law-dog Wylie Burp), and Tanya wishing to become a singer.
Their cat-friend named Tiger, has also found a relationship in the form of a female cat named Miss Kitty. However, she has chosen to leave New York behind, and head out west to find opportunity.
One evening, a cat attack on an alleyway sends almost all its mouse residents fleeing, including the Mousekowitz's who end up floating through the city's sewer systems, before finding a small congregation of mice listening to a mouse who is giving out free tickets to head west for new opportunities.
The family eagerly takes the chance, and heads out of town, leaving a message for Tiger before they go. Tiger soon after attempts to follow them, but gets sidetracked along the way by dogs at every turn.
While on the train, Fievel comes across the mouse who sold them the tickets, only to find it is a marionette that was controlled by a domineering cat named Cat R Waul, who intends to lead the mice to a town called Green River, where after lulling them into a false sense of security, intends to make mouse-burgers of the unsuspecting rodents.
Fievel heads back to warn his family, but a spider who works for the cats ends up knocking him off the train, and the Mousekowitz family arrives in Green River, saddened that their son may be lost for good this time.
Fievel wanders the desert, but is soon snatched up in the clutches of a hawk. Luckily for Fievel, the hawk is shot down by some natives of a "Mousehican" tribe. Fievel is further surprised to see Tiger among the villagers, having been claimed as their new god. Fievel tries to get Tiger to go with him to Green River, but takes off on his own.
Once in Green River, Fievel tries to tell his family what he heard on the train, but Papa dismisses these claims, feeling that the cats here are good. Soon after, Tanya is recruited by Cat R Waul as entertainment for his saloon. Tanya comes under the tutelage of Miss Kitty who is also part of the saloon entertainment, and Tanya's debut impresses the cats.
Fievel grows saddened when he hears how Cat R Waul is planning to do away with the mice in a few days, and noone believes him. One evening, he comes across an old dog in town, and is amazed to find that this dog is the actual Wylie Burp. However, Burp is old and not interested in helping at first, but tells Fievel that he would be willing to train a dog to help him out. Instead of a dog, Fievel brings Tiger to Wylie.
Wylie is at first nonplussed by Tiger's naivete, but soon, Tiger begins to show potential, and Wylie, Tiger and Fievel head into Green River to confront Cat R Waul and the other cats. The showdown concludes with all the cats chucked into a mailbag which is picked up by a passing train, leaving the town free of cats, with the exception of Tiger and Miss Kitty.
In the aftermath, Wylie gives Fievel a deputy's badge, and thanks him for believing in him.