In 3067 BC, a warrior known as the Scorpion King (Dwayne Johnson), led his army on a campaign to conquer the known world. After seven years of fighting, the Scorpion King and his army were defeated and exiled to the desert of Ahm Shere. One by one they died of heat exhaustion, leaving only the Scorpion King who swears an oath to Anubis, god of the underworld, exchanging his soul for the power to defeat his enemies. Anubis grants his wish, creating an oasis to hide the Scorpion King's pyramid and by giving him his army, an endless legion of demonic anthropomorphic jackal-headed warriors, to exact his revenge. The Army of Anubis sweeps across Egypt, destroying everything in its path, but once their task was finished, Anubis claims the Scorpion King's soul and his army.
In 1933, Rick (Brendan Fraser) and Evelyn O'Connell (Rachel Weisz) are exploring a pyramid in the ancient Egyptian city of Thebes with their son, Alex. Within, they discover and collect the Bracelet of Anubis which sets off a trap causing Rick and Evelyn to narrowly escape the pyrmaid as it floods with water. Meanwhile, Alex encounters three looters who flee after the walls start to collapse. Back in London, Alex puts the bracelet on which mystically provides him with directions to the oasis of Ahm Shere. Since it is the year of the Scorpion, Alex has seven days to reach the oasis, or the bracelet would kill him on the eighth day the moment the rays of the sun shine on him; at that point the Scorpion King and his army will also reawaken.
Later, Alex is captured by an Egyptian cult who have resurrected Imhotep: their purpose for doing so is to use Imhotep's power to defeat the Scorpion King, which would give him command of the Army of Anubis. The cult, led by Baltus Hafez (Alun Armstrong), the curator of the British Museum, includes a psychopathic warrior named Lock-Nah and Meela Nais, the reincarnation of Imhotep's love Anck-su-namun. The O'Connells set out to rescue Alex, accompanied by Evelyn's brother Jonathan and their old mate-in-arms, the Medjai Ardeth Bay. Rick's associate from his past adventures, Izzy, an airship pilot, provides transportation.
The instructions are given to Alex in stages, and he leaves clues to the next location for his parents to find. Ardeth sends a message to a growing army of his fellow Medjai, intended to stop the army of Anubis as it awakens. Along the way, the O'Connells learn of their connections to Imhotep and the Scorpion King himself: in a past life, Evelyn was Nefertiri, daughter of Seti I and protector of the Bracelet of Anubis. Rick is a Medjai, trusted to protect Evelyn. Together with their son Alex, who is the path to Ahm Shere, they make up the three sides of a pyramid. In the meantime, Imhotep brings Anck-su-namun's soul back from the underworld and places it in Meela's body, restoring her completely.
As the two groups arrive at the oasis where the Scorpion King's temple lies, the cultists are attacked by mummified pygmies and ambushed by Rick, Evelyn, Jonathan, and Ardeth. The cultists are all killed with the exception of Hafez, their leader. Lock-Nah is then killed by Ardeth, who leaves the group to assume command of the Medjai army. Rick saves Alex and manages to get him to the pyramid moments before the bracelet can kill him, and Alex is able to remove it. However, when Jonathan and Evelyn catch up, Anck-su-namun walks into the pyramid courtyard with Imhotep and stabs Evelyn in the stomach, killing her. Hafez takes the bracelet and uses it to release the Army of Anubis, whom the Medjai engage in battle.
Imhotep's powers are stripped from him by Anubis, forcing him to fight the Scorpion King as a mortal. Rick enters the temple as Imhotep summons the Scorpion King, now in the form of a half-human, half-scorpion monster. Imhotep feigns allegiance to the King, who then focuses his wrath on Rick, killing Hafez when he stumbles in. Meanwhile, Jonathan distracts Anck-su-namun while Alex uses the Book of the Dead to revive his mother; and Evelyn engages in a battle with Anck-su-namun. At the same time, Ardeth and the remnants of the Medjai army defeat the first wave of Anubis warriors, only to discover what they fought was only the vanguard, and now the full force of Anubis' army is bearing down on them. Outnumbered, the Medjai prepare to make their last stand.
Rick's battle is going badly, but he sees a series of illustrations on the walls depicting a person sharing the mark on his wrist. The illustrations reveal that the Scorpion King can be killed by the Spear of Osiris, which Jonathan has been carrying throughout the film. Although Jonathan's attempt to throw the spear results in Imhotep catching it and nearly delivering the blow himself, Rick is able to intercept it and stab the Scorpion King himself. He orders him (and his army) back to the underworld, turning both the Scorpion King and the Army of Anubis into sand, seconds before they hit the Medjai lines.
Rick and Imhotep race to escape the now-collapsing pyramid temple. A chasm leading to the underworld appears, and Rick and Imhotep fall in, barely managing to cling onto the edges of the opening. Evelyn enters the room and manages to save Rick, but Anck-su-namun is unwilling to do the same for Imhotep. Shocked and heartbroken, Imhotep willingly casts himself into the chasm; meanwhile, as she flees, Anck-su-namun accidentally falls into a pit of scarabs and is suffocated. The family climbs to the top of the pyramid and meet up with Izzy. They escape unharmed and with a massive diamond that Jonathan pulled from the top of the pyramid. The group sets off into the sunset, a grateful Ardeth bidding them farewell.