The film opens as Ben (Ryan Kelley), Gwen (Galadriel Stineman), and Kevin (Nathan Keyes) are negotiating with a group of black market dealers, who are attempting to sell them alien nanotechnology. One of them reveals herself to be Elena (Alyssa Diaz), 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 chips suddenly spring to life, controlled by a mysterious man hiding in the rafters. Kevin immediately labels it a double cross, though Elena insists that she is not responsible. While the dealers escape, Ben transforms into Big Chill (voiced by Dee Bradley Baker) and drives off the intruder. Elena escapes in the confusion, further justifying Kevin's suspicions. Ben, however, is not as easily convinced.
Arriving at their headquarters underneath the Bellwood auto repair shop, the trio, along with Max (Barry Corbin), study the chips, learning that they are a hybrid of organic and technological components. Elena, having followed the trio, breaks in; Max orders her to leave, explaining that Elena's father, Victor Validus (Herbert Siguenza), 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 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. Realizing that Max's anger towards Victor's betrayal may be clouding his judgment, 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 have left Ship-It order slips behind. Other leftover files in the office indicate that Victor was studying and upgrading the chips, and a picture indicates that Elena is close to the person controlling them. A group of people under the control of the chips attack Ben and Elena, forcing them to retreat. They head to the Ship-It building to investigate further.
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 similarly possessed by the chips. He directs a chip swarm to attack Gwen and Kevin, which eventually wreck Kevin's car after a lengthy chase. Ben, having overheard the commotion and followed 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 been spread across the globe, and now number in the millions. The group deduces that there must be a queen (voiced by Vicki Lewis) controlling the Hive, and by destroying her they will likely destroy the chips as well. During their search for the queen, however, one of the chips takes over Max. Pulling together, the group notices an anomaly in the chip distribution; while world population centers are all infected, the relatively remote Barren Rock, Missouri, has the highest concentration. 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 second car for Ben as a late birthday present.
Infiltrating the factory, the group discovers that the queen has infected Elena's father, whose body is being used to mass produce the chips. Ben uses the Omnitrix to transform into a new alien that he dubs "Nanomech" (voiced by Alex Winter) which was created by scanning the DNA of the chips over the course of the film. He enters Victor's brain and battles the queen while Gwen, Kevin, and Elena fight the drones. After a grueling battle, Ben destroys the queen and thus the entirety of the 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.