Two years after the battle of Mission City, the Autobots have formed a secret alliance with a multinational military task force known as NEST, dedicated to hunting down the remaining Decepticons scattered across the globe. While Optimus Prime and his team operate from a hidden base, teenager Sam Witwicky prepares to leave for college, hoping to return to a normal life away from the war between alien robots. As he packs his belongings, Sam unknowingly comes into contact with a small surviving shard of the Allspark, the cube that created the Transformers. The shard uploads a complex stream of ancient Cybertronian symbols directly into Sam's subconscious, causing him to have disturbing visions and uncontrollably scribble the alien glyphs. As a side effect, the shard's energy briefly animates household appliances, which attack Sam and his parents before Bumblebee intervenes. Sam gives the shard to his girlfriend, Mikaela Banes, for safekeeping.

Unbeknownst to the Autobots, the Decepticon communications officer Soundwave has been orbiting Earth as a satellite, hacking into military networks. Learning the location of both Megatron's corpse at the bottom of the Laurentian Abyss and the Allspark shard in NEST custody, Soundwave deploys the stealth operative Ravage to retrieve the shard. Using its power, the Constructicons resurrect Megatron, who then reports to his master, an ancient and powerful Decepticon known as The Fallen. The Fallen is one of the original Seven Primes, beings who once traveled the cosmos using machines called Sun Harvesters to destroy stars and create energon. When one Prime violated their law by attempting to destroy Earth's sun, the others imprisoned him, earning him the name The Fallen. Now free, he orders Megatron to capture Sam, whose mind holds the key to finding the Matrix of Leadership, the only object that can activate the Sun Harvester hidden on Earth.

At college, Sam struggles with his worsening hallucinations while rooming with Leo Spitz, a conspiracy theorist who runs a website about the Transformers. A Decepticon Pretender named Alice, disguised as a seductive fellow student, attempts to extract information from Sam. Mikaela arrives after capturing a small Decepticon spy named Wheelie, who had tried to steal the Allspark shard from her. Together with Leo, Sam and Mikaela escape Alice, who is destroyed in the chase, but are soon captured by the Decepticon Grindor and brought to an abandoned factory where Megatron and Starscream interrogate Sam. Optimus Prime and Bumblebee stage a rescue, leading to a brutal forest battle. Optimus manages to kill Grindor and severely wound Starscream but is ultimately outnumbered and killed by Megatron. The Autobots recover Optimus's body, while the Decepticons launch simultaneous attacks worldwide. The Fallen hijacks global telecommunications, demanding that humanity turn over Sam Witwicky or face annihilation.

With the military questioning NEST's effectiveness, Sam, Mikaela, and Leo seek help from Seymour Simmons, a disgraced former Sector 7 agent now running a delicatessen. Simmons reveals that Transformers have visited Earth for millennia, and the oldest among them, known as Seekers, remain hidden on the planet. With the reluctant assistance of Wheelie, the group locates Jetfire, an elderly Seeker who was once a Decepticon but abandoned the faction long ago. Disguised as an SR-71 Blackbird at the Smithsonian Air and Space Museum, Jetfire is reactivated by the Allspark shard. He teleports the group to Egypt, explaining that the Matrix of Leadership is buried in the Tomb of the Primes in Jordan. The group finds the Matrix, but it crumbles to dust due to its immense age. Sam collects the remains in a pouch, believing it still has value.

The Decepticons converge on Egypt as the Autobots and NEST forces arrive to protect Sam. The Constructicons combine into the colossal Devastator, who scales and destroys one of the pyramids to reveal the hidden Sun Harvester. During the ensuing battle, Sam is shot and mortally wounded by Megatron. As he lies dying, he experiences a vision of the Dynasty of Primes, who tell him that the Matrix is not a physical object to be found but a right that must be earned through sacrifice and courage. The Matrix reforms from the dust in Sam's pouch, and he uses it to resurrect Optimus Prime. The Fallen steals the Matrix and activates the Sun Harvester. Jetfire, mortally wounded in the fighting, sacrifices himself, offering his parts to Optimus. Upgraded with Jetfire's components, Optimus gains the ability to fly, destroys the Sun Harvester, kills The Fallen, and defeats Megatron, who retreats with Starscream to fight another day. The Autobots and their human allies return home, and Sam resumes his college life, having accepted his role in the ongoing war.