The film opens with Dholakpur under attack with some wild wolves taking away a baby of an innocent woman. Bheem comes to the rescue and defeats those wolves to save Dholakpur. Later in the Dholakpur royal palace, Princess Indumati sees a horrible dream and requests her father,King Indraverma to tell her a story. Indraverma tells Indumati about a beauty of a land,Bali. In Bali,a Balian chants some mantras to release an evil and deadly demon,Rangda. Next day, King Indraverma gives a brief introduction of a boy of Bali who is none other than Arjun,the Rajkumar(prince) of Bali. Rangda is released from Kaal Dhund and creates her own army of Leyaks,magical demons.
Next day, King Indraverma,Princess Indumati along with Bheem and his friends set out on a trip to Bali. Indraverma tells more about Bali on their way. But before they reach Bali, it is attacked by Rangda and her magical demons,Leyaks. However,Arjun manages to escape and is rescued by Guru Bahula,the royal priest of Bali. Bahula manages to escape with Arjun and hide in a cave. Arjun is found unconscious lying on a bed. He soon wakes up and addresses Bheem and friends as mere kids. Chutki and Raju feel that they shouldn't help Arjun at all. Bheem explains his friends to keep patience and asks them not to leave Arjun in this dangerous situation. Meanwhile, Rangda sends Leyaks to kill any one in Bali who has survived their previous attacks.
Next day,Arjun who doesn't look fully recovered is cheered up by Bheem who throws a laddoo high up in the air and Arjun successfully jumps and catches the laddoo and eats it,indication of his recovery from his injuries. Bheem and his friends along with Arjun train under the supervision of Guru Bahula to face Leyaks. They then see Leyaks attack Bali and all of them run to stop Leyaks by pulling their horns and tails. They fight bravely until when Bheem sees a Leyak coming to attack Arjun, who is fighting bravely and stops him but Arjun still did not like Bheem helping him out. Raju challenges Arjun and Bheem for a Leyak killing competition.
As the competition starts,ends with Arjun killing 99 Leyaks and Bheem killing 100 Leyaks,emerging as the winner. Dholu,Bholu meet up with two pretty Indonesian girls, Aci and Ayu,falling in love with them. Meanwhile,Guru Bahula wanted to find out what kind of devils these Leyaks are,so he chants a mantra and sees Guyang,Rangda's sycophant taking two sheep of Bali to Rangda to be killed. Rangda reveals that after three days,she is going to destroy Agung Mountain to destroy Barong,the supreme god of Bali. She forms electrifying rays which hit Bahula on the other side,making him unconscious. Rangda sends Rarung,a demon to kill Bheem and Arjun. Both Bheem and Arjun soon make up as a team and kill Rarung.Just then,Rarung turns into a beautiful fairy named Sonmukhi who tells them every useful information about Rangda. The kids then form a monkey army to fight with Rangda.
Next day, Bheem and Arjun along with their friends set out for Agung Mountain to complete their mission. They come across a beautiful lake in Bali and cheer up Arjun by singing a funny song. Arjun runs to a hill and sees that Rangda is increasing her powers through a ritual. Bheem speaks about something to Arjun and he hugs Bheem,indication of their friendship. They set out in different directions,with Bheem heading towards Chief Dukun,leader of the Bali Agah Tribe while Arjun,Kalia, Dholu and Bholu encountering with Baruk, caretaker of a temple on Agung Mountain. Arjun explains to Baruk that Rangda is going to attack Agung Mountain the next day. Later in the night,Chief Dukun gives Bheem and his friends a few special weapons and soon they head towards the palace.
Meanwhile Kalia,Dholu and Bholu are day dreaming. On the other hand,Baruk reaches the temple along with Arjun and tells him that they take care of this temple because it has the supreme weapon,Keris which was used by Bali's last prince to fight Rangda. Arjun rushes inside to find Keris. Bheem and his friends reach the palace to stop Rangda from completing her rituals and to save Arjun's parents. They manage to rescue Arjun's parents but when Bheem tries to stop Rangda,she sends a demon named Shadow Rangda to trick Bheem. Bheem tries to stop Shadow Rangda,thinking it is Rangda but fails and falls down under the demolished palace and is trapped.
Chutki feels that Bheem should have reached back by then but he didn't so she,Raju and Jaggu go and look for Bheem. Rangda finishes her rituals and attacks Agung Mountain becoming stronger and more powerful. Arjun is still searching for Keris when he sees fire inside the palace and thinks that his parents have been killed. King Indraverma,Baruk and Chief Dukun along with their armies head towards Agung Mountain to fight Rangda and her Leyaks. A long fight ensues while on the other hand,Chutki,Raju and Jaggu are looking Bheem in the demolished palace. They fail to find and Jaggu calls his monkey army and they manage to find Bheem,the kids and the monkeys think that he is dead. But he opens his eyes and as soon as he eats two laddoos, he is full of energy. They head towards Agung Mountain along with Arjun's parents.
They all fight with great bravery and determination and soon Jaggu once again calls the monkey army to kill the Leyaks. King Indraverma reaches there with his army and they finished all Leyaks. Bheem finds Keris but accidentally gives it to Arjun who in an attempt to finish Rangda fails. Bheem jumps into boiling lava and is rescued by Barong. He explains to Bheem that not Arjun,he is the real prince. Bheem succeeds to finish Rangda and bring happiness and prosperity in Bali once and for all. Arjun's coronation takes place in the palace and the ceremony ends with a traditional Balinese dance as the film comes to an end.
