Kowalski unveils his latest invention: "nanites," tiny robots which are capable of operating any mechanical object, thus freeing the penguins of time spent on chores. Skipper initially fears the nanites will become another of Kowalski's disastrous inventions, but changes his mind after Kowalski demonstrates that the nanites are programmed to not allow any harm to come to a penguin. Unfortunately, the programming has the unintended consequence of the nanites becoming overprotective, first by inhibiting the team's rescue of Barry the poison-dart frog when his tongue is caught in the cotton candy machine- although they are able to outmaneouvre the nanites and save Barry anyway- and later by containing them in their HQ.
After their family sponsors many of the zoo's habitats, the Vesuvius twins pressure Alice to allow them to take Skipper and Julien home with them to "play." Their version of play involves placing the two through uncomfortable scenarios for their amusement, including trying to make them fight each other, which Skipper refuses to engage in but Julien goes along with because of his fascination with the shiny objects the twins reward him with.
Alone on a secret mission in Shanghai, Skipper walks into a trap set by Hans and Dr. Blowhole which results in Skipper's memories being taken from him by Blowhole's "mind jacker" device before he falls into the ocean. Blowhole plans to use the mind-jacked information to aid in assaulting the penguins' HQ. Later, Skipper washes up on an island, confused about where he is and how he got there. To aid in helping him regain his memory, Skipper's mind hallucinates a "spirit guide" for him to follow in the form of Alex, a lion who had once been a Central Park Zoo neighbor.
The penguins set off on a sailing trip to the Massachusetts coast, but poor weather abruptly tosses them onto the streets of Hoboken. There, the team is quickly noticed by humans, boxed, and brought to the feared Hoboken Zoo. But the sight that greets them there is not the wasteland they had expected; instead, the zoo is pristine. Soon, the team is greeted by friends and enemies Lulu, Hans, Savio, Clemson, and Rhonda who cheerfully welcome the penguins to Hoboken and tell them about Frances, a new zookeeper who has made their lives enjoyable, including by letting them use massage chairs.
When Private's Uncle Nigel visits the penguins, he quickly becomes a bore to all but his nephew. However, once they are alone, Nigel confides in Private that he is actually a spy targeting the Red Squirrel. The two soon head into Central Park to hunt for the villain, though Private does not believe he exists. However, Red soon appears; Nigel fights him and Private disarms his plant life-destroying missile before Red escapes. Later, at the HQ, the other penguins do not believe it when Private tells of taking on Red, and Nigel denies any confrontation took place.