When police funding is cut, Governor Neilson announces that one of the city's two police academies will have to be closed down. To make it fair, Neilson announces a competition to determine which academy will stay opened. Commandant Eric Lassard calls back some of his former students to train the new batch of students, hoping to get the edge on the rival academy, which is run by Commandant Mauser. Lassard's new instructors, the former students he has brought back, include Carey Mahoney, Eugene Tackleberry, Moses Hightower, Debbie Callahan, Larvell Jones, Laverne Hooks, and Douglas Fackler. Among the new students at Lassard's academy are Cadet Nogata, Cadet Karen Adams, Cadet Bud Kirkland, Cadet Sarah, Cadet Hedges, former gang leader Zed, and Zed's roommate, Cadet Sweetchuck. In order to increase his own academy's chances of winning, Mauser persuades two of Lassard's officers, Kyle Blanks and Chad Copeland, to turn traitor and help Mauser. The competition becomes complicated when a local marina is robbed by a gang of thieves who are dressed as busboys.