Three American college students studying abroad are lured to a Slovakian hostel, and discover the grim reality behind it. Three female college students take a detour from their partying, enticed by a beautiful European woman who promises seclusion, safety and maybe even romance. What they get is a living hell where they are sold to the highest bidder who's fondest wish is to kill them slowly. Hostel 2 also follows 2 American men who, on the flip side of the coin, are willing to pay to join an exclusive club where a life will end at their hands...any way they like. It's a story of human monsters and the almighty dollar as only Eli Roth could tell it.

Shortly after the events of Hostel, Paxton (Jay Hernandez) is suffering from nightmares and lives in seclusion with his girlfriend Stephanie (Jordan Ladd). The two get into an argument where Stephanie announces Paxton's paranoia as insufferable and exaggerated. She wakes up the next morning to find Paxton decapitated. An unmarked box (presumably containing Paxton's severed head) is then delivered to Elite Hunting boss Sasha (Milan Kňažko), as he relaxes at an outdoor cafe with his Bloodhounds.

In Italy, three art students, wealthy Beth (Lauren German), tough Whitney (Bijou Phillips), and outcast Lorna (Heather Matarazzo) are convinced by Axelle (Vera Jordanova), a nude model they are sketching, to join her on a vacation to a luxurious spa, rather than Prague. The four travel to a small Slovakian village and check into the local hostel, where the desk clerk uploads their passport photos to an auction website where people can bid all over the world to torture their victims. American businessman Todd (Richard Burgi) submits the winning bids on Whitney and Beth for himself and his passive best friend Stuart (Roger Bart).

Later that night, at the village's Harvest Festival, Lorna discovers that Beth has inherited a vast fortune from her mother. After Stuart and Todd receive their Elite Hunting tattoos, they go to the festival. Stuart approaches Beth and the two share a friendly, albeit awkward, conversation. Despite being warned about her safety from Beth, an intoxicated Lorna leaves to go on a boat ride with Roman, a charismatic local, who proceeds to kidnap Lorna with the help of two accomplices. Beth and Whitney leave the party, while Axelle volunteers to stay behind and wait for Lorna. Whitney wants to sleep with local Miroslav (Stanislav Ianevski), but Beth convinces her otherwise, stating that Miroslav is too "shady" and promises to make it up to her.

The next morning Beth, Whitney, Axelle, and Miroslav head to the local spa to relax. Basking in the relaxing atmosphere of the hot springs, Beth is able to doze off. Meanwhile, the now naked and gagged Lorna is hung upside down, her feet are chained tightly together above her, and her wrists are chained tightly together behind her back. The men who kidnapped Lorna prepare the room with candles for a client named Mrs. Bathory (Monika Malacova) who enters the room, strips off her robe, and lies naked beneath Lorna. She then uses a long scythe to repeatedly slash the screaming Lorna's back and torso, and revels in bathing in Lorna's blood, before fatally slashing Lorna's throat with a sickle.

Beth wakes up only to find herself alone and her belongings stolen. As she looks for her friends, she notices several men approaching her. Fearing for her life, she climbs over the spa walls. While making her escape, she is ambushed by the "Bubblegum Gang", a gang of violent street children. Before they are able to descend upon her, however, Axelle and Sasha appear and ward them away from her. Axelle escorts a flustered but somewhat relieved Beth to their vehicle. With Axelle and Beth away, Sasha confronts the children. Angry that they attacked Beth, Sasha draws out his gun and has one of the children, a boy, brought forward before him. He then kills the boy, and the rest of the gang flees.

Meanwhile, Whitney is taken out of her cell where many other people are restrained and soon to be tortured. Whitney is taken to a room where an old woman applies makeup to her bruised face. In an effort to calm Whitney down, who is screaming and pleading, the old woman unlocks one of Whitney's handcuffs. Whitney then bites off part of the old woman's nose and tries to escape, but is unable to escape due to the increased security. After being taken to Sasha's mansion, Beth realizes that Sasha and Axelle are responsible for Whitney and Lorna's disappearances after seeing the men who tried to kidnap her at the spa coming up the stairs of Sasha's home. She tries to hide and discovers a room filled with severed heads, including Paxton's, before being captured and taken to the factory.

Having been notified via pager, Todd and Stuart are chauffeured to the factory, where they joke around with some of the tools and uniforms. Stuart then enters his room where Beth is strapped to a chair with a sack covering her head. Stuart looks around the room at the tools with horror. He then takes the sack off Beth's head and explains about Elite Hunting. Stuart tells Beth that the group is a worldwide secret society where members come to Slovakia to kill people that the organization abducts. He then unties her from the chair and almost decides to let her escape, but then knocks her out and reties her to the chair. The passive Stuart now suddenly becomes angry; ranting and raving at Beth as if he is talking to his domineering wife.

Whitney is taken to Todd's cell and strapped to a chair, where he gleefully terrorizes her with a circular saw but loses his nerve after accidentally cutting through part of her skull. Horrified by what he has done, Todd tries to leave without killing Whitney but one of the guards reminds him that he is contractually obligated to kill her and cannot leave until he does so. Todd angrily refuses, prompting the other guards to turn some savage dogs loose and maul him to death. The Elite Hunting representatives try to find someone to finish off Whitney, inquiring whether an Italian man (Cannibal Holocaust director Ruggero Deodato) who is shown to be eating Miroslav alive and a man who has his victim chained to an electrified metal bed are interested.

Stuart, now torturing Beth, is approached by The Elite Hunting representatives. They offer Whitney to Stuart. After discovering that Todd has been killed, the now deranged and sadistic Stuart accepts the offer and kills Whitney by beheading her. He returns to Beth, blaming her for Todd's death. As he resumes torturing her, she seduces him into releasing her from the chair. Stuart lays Beth on the floor and begins to attempt to rape her, but she fights him off as he lies on her and chains him to the chair. Beth demands that Stuart tell her the code to the cell door, then sticks a needle in his ear when he refuses to tell her. Stuart tells Beth the code (which is Beth's birthday, December 12), but she still needs to be buzzed through the door, which inadvertently summons Sasha and the guards to the room. Beth offers to buy her freedom with part of her inheritance. When Sasha explains to her that she must kill somebody to leave, Stuart insults Beth with a slur she hates being called. Although warned, he proceeds to call her it again. Enraged, Beth cuts off Stuart's genitals and tosses them to one of the guard dogs, leaving him to die as he screams in agonizing pain. Per the standard contract, Beth is given an Elite Hunting tattoo and is made a member.

In the closing sequence, Axelle is lured from the village festival into the woods by the Bubblegum Gang, who stole her purse. The revenge-seeking Beth surprises and beheads her for leading her friends to their deaths. The Bubblegum Gang then play soccer with Axelle's head.