The film opens as Ben, Gwen, and Kevin are negotiating with a group of black market dealers at a mill, who are attempting to sell them alien nanochips, which are causing interference with the Omnitrix. One of them reveals herself to be Elena, a childhood friend of Ben and Gwen and a fellow Plumber’s kid. Elena explains that she had set up the negotiations to lure Ben out into the open, and explains that her father has been abducted and that she needs their help to find him.
Just as Ben agrees to help her, the insect like chips suddenly spring to life and attack, while the group sees that they are being controlled by a man on a catwalk. Kevin sees it as a double cross, though Elena insists that she is not responsible. While the dealers escape, Ben gets far enough from the chips to allow him to transform into Big Chill and fight off the swarm of flying chips along with Gwen and Kevin until the man in the rafters escapes. Elena escapes in the confusion, further justifying Kevin’s suspicions. Though Gwen quickly sides with Kevin, Ben is not as easily convinced.
Arriving at their headquarters underneath the Bellwood auto repair shop, the trio, along with Grandpa Max, study one of the chips salvaged after fighting the swarm, learning that they are Techno-organic material/a hybrid of organic and technological components. Elena, having followed the trio, breaks in and Max orders her to leave, explaining that Elena’s father, Victor Validus, was an apprentice of his who was dishonorably discharged after stealing the original chips. Ben refuses to believe that Elena is like her father, and breaks ranks with his grandfather and teammates to help her.
While Max is away, Gwen and Kevin hack into the computer files relating to Victor Validus and discover a video of Max interrogating Victor, in which Victor insists that ”the Hive”, the hive mind intelligence behind the chips, is coming to take over the planet, the chips being revealed to be able to enter and possess people. It is revealed that Victor stole the chips to further research them because he realized that they were threat, as well as that they were dormant instead of dead, as the Plumbers believed. Realizing that Max’s anger towards Victor’s betrayal may be clouding his judgement, Gwen and Kevin decide to aid Ben as well.
Meanwhile, Ben and Elena arrive at Victor’s old laboratory. It has been cleared out by the Hive, but they left Ship-It order slips behind. Other discarded files indicate that Victor was studying and upgrading the chips. Elena reveals that her father became erratic and he stopped returning home. He also appears to be the man from the rafters controlling the chips. A mob under the control of the chips ambush Ben and Elena, forcing them to retreat. The Omnitrix again experiences interference around the chips and keeps Ben from transforming around them, but Ben utilizes a scanning function on it to temporarily repel the mob and allow him and Elena to escape. They head to the Ship-It building to investigate further, though Ben is now somewhat suspicious of Elena himself, realizing the mob expected him and Elena to go to the lab and set a trap for them. Ben finds an order slip made out for that day, when Elena claimed that Victor had already been missing for weeks.
Gwen and Kevin, having reached the building first, are too late to stop the distribution of the chips. Instead, they are met by one of the Ship-It employees, who is also under the chips’ control. He summons another larger chip swarm, now capable of forming solid, weaponizable shapes, to attack Gwen and Kevin, which eventually wreck Kevin’s car (a modified Dodge Challenger) during a lengthy chase. Ben, overhearing the commotion and following them, uses Humongousaur (voiced by Dee Bradley Baker) to defeat the swarm, completely demolishing Kevin’s car in the process.
By the time they return to headquarters, the chips have spread across the globe, and number in the millions. Gwen realizes the swarm’s new ability is a sign that they can adapt to threats and become smarter. The group also deduces the chips have a queen (voiced by Wendy Cutler), as the chip’s hosts have mentioned her. They believed that they can stop the chips by destroying her, but during their search for the Queen, one of the active chips they were studying possesses Max and leaves with him. Pulling together, the group notice that while world population centers are all infected, the relatively remote Barren Rock, Missouri, has the highest concentration, an apparent anomaly in their distribution. The town is home to the central headquarters of Ship-It. With Kevin’s car out of commission, Kevin reveals that he has built a black and green car for Ben (a heavily modified Mazda RX-8), called DX Mark 10 (confirmed by Bandai and Dwayne McDuffie) as a ”late birthday present.”
Infiltrating the factory, populated by multiple infected, including Max, the group discovers that the Queen infected Elena’s father, and his body is being used as a hive to rapidly mass-produce the chips. Possessed by the Queen, Victor is also the man from the mill controlling the chips. Elena admits that she knew her father was infected, but didn’t tell them because she feared they would believe she betrayed them, just as the Plumbers did to Victor. Gwen and Kevin reluctantly suggest killing Victor to stop the Hive, but Elena and Ben refuse to consider it. Fearing being possessed by the chips while in his alien forms, Ben uses the Omnitrix to transform into a new alien that he calls ”Nanomech” (voiced by Alex Winter), which was created by scanning the DNA of the chips, with Ben realizing that this was the cause of the apparent interference in the Omnitrix. He flies into Victor’s head and battles the Queen, who briefly tries to assert her hive mind on him while he resists, while Gwen, Kevin, and Elena fight the infected. As the dormant chips in the factory begin to activate, Nanomech uses the chips ability to adapt to overwhelm and destroy the Queen, and all of the other chips, freeing everybody from their control.
In the aftermath, Max, after personally apologizing to Victor, decides to retire and leave his position as leader to Ben, but Ben refuses to allow him to do so. The film ends as Ben, Gwen, Kevin, and Elena drive home.