In North West Australia, highway patrol officers Gary Bulmer (Shane Connor) and Brian O'Connor (Ben Gerrard) are parked by an outback highway, desperate to meet a quota for speeding tickets. Mick Taylor (John Jarratt) drives past going under the speed limit and they pull him over, claiming he was speeding. After belittling and insulting Mick, the two officers give him a speeding ticket and an order to get rid of his truck. Soon after in retaliation, Mick shoots O'Connor in the head as the officers drive away, causing the car to crash in a gully. Despite Bulmer's desperate pleas, Mick breaks his leg, stabs him in the back with a Bowie knife paralysing his legs and places the mortally wounded officer back in the car before dousing it with petrol and setting it alight. Mick departs, leaving Bulmer to burn alive in the resulting explosion.
Meanwhile, a young German couple, Rutger and Katarina, hitchhike from Sydney to Wolf Creek Crater and camp nearby. In the middle of the night, Mick arrives at the campsite and offers them a lift to a caravan site so they do not get charged for camping in a national park. When Rutger declines his offer, Mick loses his temper and stabs Rutger in the back. He then ties Katarina up and prepares to rape her, but a wounded Rutger battles Mick; Rutger is eventually overpowered and decapitated. Mick then tells Katarina they'll be spending "a nice long few months together" before strangling her until she falls unconscious.
Katarina wakes up later in the night to see Mick cutting up Rutger's body to feed to his dogs. She flees into the bush and Mick pursues her in his truck, referring to this as playing a game of hide and seek. At the same time, English tourist Paul Hammersmith (Ryan Corr) is driving along the highway, and stops when he sees Katarina standing in the road. He picks her up, but Mick relentlessly pursues them. Mick shoots at Paul, but accidentally kills Katarina instead. Paul then drives off, remorsefully leaving Katarina's body in the sand and covering it with just a sleeping bag at daybreak.
Paul reaches a highway. Realising he has low fuel, he tries to flag down a truck in the distance. He soon realises that Mick is driving the truck, having killed the original driver. After a long chase, during which Mick runs over numerous kangaroos which are crossing the highway, Mick nudges Paul's vehicle at a steep hillside, sending it rolling down into a valley. Paul survives the crash and taunts Mick, who sends the truck hurtling down into Paul's vehicle, which explodes as Paul barely escapes the area. Paul treks across the outback for hours looking for help. Exhausted and dehydrated, he passes out near an outback homestead and is given food and shelter by an elderly couple. They plan to take Paul to the nearest town after he has eaten, but Mick finds the house, and shoots the couple dead. Paul flees again; Mick catches Paul hiding in the grassland and knocks him out.
Paul wakes up in Mick's dungeon, zip-tied to a chair. Mick is furious at Paul for his role in Katarina's death and prepares to torture him, but Paul pacifies him with his "English wit" by narrating limericks and leading Mick in drinking songs that he claims he learned at boarding school. He also gets Mick to join him in singing Rolf Harris's "Tie Me Kangaroo Down, Sport". Mick's torture for Paul consists of a ten-question quiz about Australian culture and history, with a promise to free him if he answers five of them correctly. However, for each question Paul answers incorrectly, he loses a finger. Paul answers the first two questions correctly and reveals that he is a history major. After he gets the next question 'wrong', Mick (irritated by Paul's knowledge) grinds off one of his fingers with a grinder.
The next question was with regard to cricket and who the greatest cricketer was (Donald Bradman), with Paul replying Douglas Jardine incorrectly. When Paul intentionally gets this answer wrong, Mick cuts his other hand free (at Paul's request) from the zip tie and grinds off a finger. Paul then grabs a nearby hammer and clubs Mick with it before fleeing through the tunnels of the dungeon. Paul finds numerous decayed corpses and a severely emaciated woman begging to be freed. While being pursued by an injured Mick, Paul eventually stumbles across an exit, but notices a sheet on the ground directly in front of it. Lifting it up, he finds a Punji stick trap underneath. As he considers trying to jump over it, he hears someone coming and hides, assuming it's Mick. When the figure approaches, he knocks them into the trap and kills them; it was the woman he encountered earlier. Immediately afterwards, Mick finds and subdues Paul, and headbutts him unconscious.
When he wakes up, Paul finds himself, dressed only in his underpants, on a footpath in a small town, with multiple wounds across his body. He finds a handwritten note near him which reads "LOSER" before being discovered by two police officers. A series of title cards before the credits reveal that despite reporting Mick to the police, Paul was held as a suspect in various unsolved murders in the Wolf Creek area. During the investigation, he suffered a complete mental breakdown and was deported back to the UK and placed in full-time care at Ashworth Hospital in Maghull, Merseyside. The film ends like the first film with Mick walking off into the outback with his rifle.
Mick Taylor ultimately escapes justice, leaving a trail of bodies and psychological devastation, while the lone surviving tourist is left broken and blamed for the crimes.
The ending reinforces Mick Taylor’s status as an unstoppable force in the outback, evading capture and ensuring his legend persists. The survivor’s fate underlines the film’s bleak view of justice and isolation, with the outback swallowing evidence, hope, and sanity. It’s a conclusion that refuses catharsis, instead amplifying the sense of helplessness and terror that defines the series.
