In a flashback sequence following the first film, Lawrence Gordon (Cary Elwes) crawls from the bathroom to find help after sawing off his foot. Along the way, he reaches a steam pipe and uses it to cauterize his ankle stump. In the present, Ryan and Brad (Jon Cor and Sebastian Pigott) awaken in a storefront window in a shopping area in front of a crowd of people, their wrists bound to a worktable. In front of each man is a buzz saw, and their mutual lover, Dina (Anne Lee Greene) is suspended above a third saw. Jigsaw's puppet tells them that they can either kill one another or allow Dina to die, and after realizing her betrayal, they decide to save themselves and allow her to lower onto the saw, killing her.



Jill Tuck (Betsy Russell) goes to Matt Gibson (Chad Donella), an internal affairs detective at Mark Hoffman's (Costas Mandylor) precinct, and offers to incriminate Hoffman in exchange for immunity and protection. Meanwhile, Hoffman abducts four racist skinheads and places them in a trap in an abandoned junkyard that kills all of them. After a gathering of past Jigsaw survivors takes place, Hoffman abducts Bobby Dagen (Sean Patrick Flanery), a self-help guru who achieved fame and fortune by falsely stating that he survived a Jigsaw trap. Hoffman sends videos to Gibson throughout the film, offering cryptic clues to his location and promising to stop the games if Jill is given to him.



Bobby awakens in an abandoned insane asylum and is informed that his wife Joyce (Gina Holden) has also been abducted and will die if he does not save her in sixty minutes. After escaping a cage hanging over a floor of spikes, Dagen navigates his way through the asylum, finding his publicist Nina (Naomi Snieckus), his lawyer Suzanne (Rebecca Marshall) and his close friend Cale (Dean Armstrong) all in traps representing their respective sins. Despite his efforts to save them, all three are killed. Gibson soon discovers the location of the asylum and sends a SWAT team, who are sealed in one section of the asylum and killed by toxic gas. Gibson also finds Hoffman's command center, where he discovers that Hoffman has hacked the police security camera system, and is killed by automatic turret gun along with both of his men. Hoffman, who had been posing as one of the junkyard corpses, infiltrates police headquarters and kills Dr. Heffner (James Van Patten), Detective Rogers (Laurence Anthony) and several officers before finding Jill. After a brief struggle, he restrains her the same way she restrained him, then secures the original Reverse Bear-Trap to her head, which kills her.



After removing two teeth to retrieve a combination to a locked door, Dagen reaches Joyce and is forced to drive two hooks through his pectoral muscles, the trap he claimed to survive, then hoist himself up by the chains to deactivate her trap. However, the hooks rip through his muscles and he falls to the ground, and a brazen bull capsule slams shut around Joyce and burns her alive. Moments after Hoffman destroys his workshop, he is captured by three Pighead-masked figures and the leader reveals himself as Lawrence Gordon. Flashbacks reveal that John Kramer (Tobin Bell) found Lawrence by the steam pipe and helped him recover, and Lawrence had worked in secret with John ever since. Tasked to watch over Jill after John's death and to take action if anything happened to her, Lawrence brings Hoffman to the bathroom from the first film and shackles him by the ankle. He throws away the hacksaw he had sawed his foot with, then leaves Hoffman alone.