After learning that Katherine (aka Kitty his childhood friend and romantic interest) is marrying Captain William Boone (Cary Elwes) and after being humilated by Boone's henchmen, Mowgli (Jason Scott Lee) decides to return to the jungle. After sorrowfully watching him leave, Katherine realizes she can't marry Boone and breaks off their relationship. She decides to return to England, but the caravan is ambushed by bandits, her father Colonel Geofferey is shot and injured, but Doctor Plumford is rescued by Mowgli and his animal friends. Mowgli then sends Plumford to save Baloo who was shot earlier by some of Boone's henchmen while escaping capture.
The bandits are rogue soldiers of the British army now led by Boone. Mowgli goes to them and allows himself to be captured so he can escort them to the treasure in the lost city in exchange for Kitty's life to be spared. The next morning, he escapes, knowing that Shere Khan hunts the party. Harley chases after him but drowns in quicksand. Mowgli returns to save Geoffrey who was left behind by Boone and sends him back to the city by way of an elephant. Before parting ways, Geoffrey finally comes to respect Mowgli.
By the time Mowgli, Boone, and Katherine reach the treasure room, all of Boone's men have been killed: Tabaqui after falling off a cliff following a fight with Mowgli, Wilkins who is mauled by Shere Khan, and Buldeo who is buried alive in a crypt. Mowgli defeats Boone in a fight and escapes with Katherine as Boone begins helping himself to the treasure. The same snake that Mowgli fought earlier attacks him. Boone falls into a pool of water and is weighed down to the bottom by the treasure he stole where he sees the past victims of the snake. The snake attacks and kills him.
Outside the lost city, Mowgli and Katherine are confronted by Shere Khan who quickly submits to Mowgli after Mowgli roars back. Mowgli tells Katherine that Shere Khan sees him as a creature of the jungle, not as a man, finally fulfilling the prophecy he was told in his dreams as a child.
Crossing the bridge out of the jungle, Mowgli and Katherine are reunited with her fully recovered father and Baloo. Kitty and Mowgli finally kiss. As the movie ends, the narrator tells us that this is how Mowgli became lord of the jungle, and that all who keep the jungle law will have a long life.