The movie starts off with Stitch dreaming about causing destruction in a hover car. He crashed it into Lilo's house and Lilo asks Stitch why he's doing all of this. Stitch appears and his eyes turn green, scratching Lilo. Lilo gasps and says "Wake up Stitch!". Stitch eventually wakes up from his dream and sees Lilo shaking him. Stitch talks to Lilo about his dream and Lilo puts up a picture of it. Lilo explains that Stitch is worried he'll turn bad again. As Lilo leaves the room, Stitch acts funny for a second.
They run downstairs where everyone is eating breakfast. Nani asks for help cleaning up the house and Jumba and Pleakley say they don't have time. Lilo and Stitch run to Lilo's hula.
Lilo bursts into the room explaining some kind of idea and Moses interrupts her. He explains a contest coming up and Mertle brags about winning. While everyone practices, Moses calls Lilo over and shows her a picture of her mother, and how she won the contest when she was Lilo's age. Everyone walks over to examine the picture.
After Mertle comes out and tells Lilo that Stitch can take a picture of her when she wins. She insults Lilo about her mother, and Lilo gets mad. Stitch stops her and Mertle says another insult. Stitch lets her go and takes pictures of the fight.
At Lilo's house, Moses and Nani talk about the situation at After a hustle with Jumba and Pleakley they continue the conversation.
David offers Nani a ticket to go to the movies with him, but she can't at the moment. Lilo promises to be good, and she and Stitch are seen talking in a tree fort. Lilo doesn't think she can do it, but Stitch does. They then try to think up some hula ideas.
Nani calls them down for dinner, and ends having to drag them down. The group, along with David, all watch a movie while enjoying some alien type treats Nani made. Nani falls asleep and Pleakley tells David that their relationship has fizzled.
While watching the movie, Stitch begins acting strange with his eyes turning green. Suddenly he destroys everything in the room.
Jumba and Pleakley go to their ship and discover that because Stitch was never fully charged when created, his cicuits are going crazy and his energy is disappearing. If Jumba doesn't fix Stitch, he'll die. Stitch erases part of his goodness chart and apologizes to Lilo.
The next day they travel across the island looking for ideas at every place Elvis had gone to once before. But at every place, Stitch causes more trouble. Eventually his goodness chart is nearly empty. The two just about give up hope, when they hear some music that gives Lilo an idea. They then practice it.
The next day at Lilo's rehersal, Stitch accidently causes more destruction and ruins it. Lilo is not allowed to practice at school again until after the contest.
Meanwhile Pleakley keeps trying to help David out at getting Nani to like him again.
Stitch's goodness level has reached zero, and he goes around the island doing good deeds until it's filled again. When he runs home to show Lilo, she doesn't care and is too busy practising. The two end up getting into a big fight and are stopped when Nani sends them both to their room. Stitch apologizes to Lilo and Lilo says Stitch failed her when she needed him. Stitch shows Lilo he's good and she gives him one more chance.
When she leaves to get props, Stitch goes crazy again and destroys the room. Lilo comes back and tells Stitch to leave.
That night Nani and Lilo talk to each other about their mother. Jumba tries to finish the machine to save Stitch, but it fails. Pleakley encourages him to keep trying. Stitch is seen up in the tree fort the next day, he's determined to prove he's good.
Lilo gets ready for her performance, and Stitch appears to wish her good luck. Stitch begins to act strange and Lilo asks him what's wrong. Stitch scratches Lilo and realizes what he's done. Lilo tries to help Stitch, but Stitch runs away. When it comes time for her to perform, she leaves and goes after Stitch.
Jumba has finished the machine. But, there's no time to test it as Stitch is almost out of energy. They all look for him, but can't find him anywhere. Soon the ship takes off and Stitch is seen piloting it. Nani, David, Lilo, Jumba, and Pleakley all hop in Nani's VW Beetle to follow him.
Using Pleakley's phone, they try to convince Stitch to come back. Stitch says he can never come back and begins to malfunction. He crashes the ship and Nani reveals the hover car in the trunk of the car. Lilo hops in and goes after Stitch.
She finds the ship but can't locate Stitch. She eventually finds him off the side of the cliff and Stitch says he's too dangerous. Lilo says he's not and gets him into Jumba's machine. She turns it on but it's not working. Stitch puts his hand on the glass over Lilo's. Everyone else arrives, only to discover that they're too late. Lilo takes Stitch out and hugs him, putting the flower from her head onto Stitch's body. She cries and tells Stitch she loves him. After a sorrowful speech, Stitch begins moving, his energy has been restored. Stitch says, "Stitch not dangerous, Stitch fluffy!". Everyone is happy he's alright and Jumba and Pleakley wonder how it happened. Lilo says it's just like the story, love is more powerful than death.
Everyone is seen dancing together on the stage where the contest was held, only nobody's there. Nani kisses David and Lilo and Stitch are happy together.