Several years after settling in to their new home in The Bronx, New York, the impoverished Mousekewitz family soon finds that conditions are not as ideal as they had hoped, as they find themselves still struggling against the attacks of mouse-hungry felines. Fievel spends his days thinking about the wild west dog-sheriff Wylie Burp, while his sister, Tanya, dreams of becoming a singer. Meanwhile, Tiger’s girlfriend Miss Kitty leaves him to find a new life out West, tired of the life of an alley cat, and remarking that perhaps she’s looking for a cat that is “more like a dog.”
Back in the alleys, a regal feline named Cat R. Waul devises a plan to deliver the mice into his clutches. He first launches a full-scale cat attack to drive all the mice to the sewers, specifically ordering his fellow cats to not eat any of them. Using a mouse-cowpoke marionette, he then entices the neighborhood mice, including the Mousekewitzs, into moving to a better life out west (“Way Out West”). Tiger chases the train, trying to catch up with his friends, but is thrown off course by a pack of angry dogs.
While on the west-bound train, Fievel wanders into the livestock car, where he overhears the cats revealing their plot to turn them into “mouse burgers.” After being discovered, Fievel is thrown from the train by Cat R. Waul’s hench-spider, T.R. Chula, landing the mouse in the middle of the desert. The Mousekewitzes are heartbroken once again over the loss of Fievel and arrive at Green River with heavy hearts.
Upon arrival at Green River, the Mousekewitzs begin to find a suitable home, positive that their son Fievel would find them once again. Papa helps his family set up a home under an old water tower, explaining while other mice would scamper for a land to live in, a smart mouse would live closer to water in the dusty country. However, Chula soon blocks up the water tower, drying up the river. Cat R. Waul approaches the mice and proposes to build a better community where cats and mice can live together in peace. Meanwhile, Fievel is wandering aimlessly through the desert, as is Tiger, who has found his way out west as well, and the two pass each other.
However, each one figures that the other is a mirage and they continue on their separate ways. Tiger is captured by mouse Indians and hailed as a god.
Fievel is picked up by a hawk and dropped over the mouse Native American village when fireworks scare and explode on the bird, making his feathers pop out of his body and reunites with Tiger. Tiger chooses to stay in while Fievel catches a passing tumbleweed, which takes him to Green River.
As soon as Fievel makes his arrival, he quickly reunites with his family. He then tries to expose Cat R. Waul’s true intentions. However, the mice inhabitants are already inspired by Cat R. Waul’s visions and are convinced that the cats in Green River are good. Inside a saloon that is under construction, Fievel once more learns of the cats’ real plan before he is discovered. He confronts Cat R. Waul and is almost eaten in the process. However, he happens to hear Tanya, Fievel’s older sister, singing while working and is enchanted by her voice (“Dreams to Dream”).