The film begins where the previous film ended. Ragini's MMS sex tape has gone viral along with rumours of the house's haunted nature, where the MMS was filmed. This catches the attention of a sleazy director, Rocks (Parvin Dabas) who decides to make a movie on the haunting. He signs an ex-porn star, Sunny (Sunny Leone) as the lead actress and decides to shoot the movie in the same house where the MMS was recorded.
Sunny, who takes an instant liking to the script, seeks permission to meet the real Ragini (Kainaz Motivala), (who is now in a mental asylum), to get a better in-depth look of the character she wants to portray. But the meeting goes horribly wrong when Ragini stabs herself brutally in the neck and dies.
Later, the cast and crew arrive at the haunted house to shoot and strange things begin to happen, especially to Sunny. Elsewhere, Dr. Meera Dutta (Divya Dutta), a psychiatrist who specializes in cases for which science has no answers, takes up Ragini's case. After going through old news paper clipping and video tapes of Ragini, she finds the truth regarding the haunting.
She finds out that the ghost haunting the house, in life was a married woman with two daughters and a son. She was more attached to her son, because she had conceived him after much difficulty and praying. One day, the boy and his two sisters were playing hide and seek when the boy slipped into a well and drowned. This drove his mother insane and caused her to embark on a desperate quest to resurrect him from the dead. A priest who claimed to perform black magic arrived and convinced her the only way to bring her son back was to sacrifice both of her daughters. The insane mother agreed and the priest chopped off the daughters' heads. He put the sword in her hands, told her to close her eyes, and chant. While she did that he stole all of her money and ran. When the villagers finally arrived, they assumed that the mother was practicing witch craft and punished her by hanging her from a tree, stoning her, and burning her alive. The woman survived, finally dropped from the tree, and after cursing them all, killed herself by stabbing herself in the neck with the rattle-toy her son used to play with.
Dr. Dutta then rushes to the shooting location in order to inform the cast and crew to abandon the their shooting and leave the house immediately. But it is too late as the ghost has already possessed Sunny and started killing the film's cast and crew by either luring them into having sex or killing them by catching them off guard. Only the scriptwriter Satya (Saahil Prem) and actress Monali (Sandhya Mridul) are left alive.
As the Dr. Dutta, Monali and Satya attempt to drive the ghost out of Sunny, Monali gets killed. Afterwards, when Satya accidentally steps on the rattle toy with which the woman committed suicide prior to becoming a ghost, it causes Sunny temporary pain, and thereby forces the ghost to temporarily leave Sunny. Dr. Dutta realises the toy's importance and urges Satya to destroy it. Eventually the ghost is destroyed along with the rattle. And Sunny, Satya and Dr. Dutta leave the house, having exorcised the ghost and solving the mystery behind the haunting. At the end of the movie a rocking chair is shown rocking back and forth and a child's voice is heard, signifying that there is still a ghost in the house.