Unlike the first film (which has a serious and darker tone and received a PG rating), Inspector Gadget 2 received a G rating and is considered a more faithful adaptation of the original animated series; the characters' personalities were altered to more closely match those of their cartoon counterparts and Doctor Claw's face is never shown in full.

Crime in Riverton has ceased ever since Dr. Claw was arrested and sent to prison, and Inspector Gadget and his Gadgetmobile are having problems in their line of work, mostly because Gadget - out of boredom - is overreacting to and sending people to jail for unintentional and minor transgressions by them against the law (such as sending a group of girl scouts to jail for selling cookies that were barely past the expiration date).

To make things worse, the cyborg human police officer has been having problems with glitches that cause the wrong weapon to be activated whenever he says “Go go gadget…”.

Gadget begins to fall in love with G2, though she does not reciprocate as she prefers to work alone, viewing him as a nuisance but simultaneously appreciating his determination to fight crime.

Dr. Claw hatches a new plan to steal five trillion dollars worth of gold from the Federal Reserve.

Gadget repeatedly attempts to stop him, but is continually foiled by his own bumbling and gadgetry glitches, which allow Claw's henchmen, Brick and McKibble, and their three additional recruits (Squint, Jungle Bob, and The Ninja) to steal components for the scheme unnoticed; his antics also prevent G2 from stopping Claw.

Deciding to investigate by herself, Penny eventually finds and infiltrates Claw's hideout at the abandoned Bowl-Rite factory outside the city.

A firecracker lands right near Quimby and Wilson and explodes shortly afterwards, causing both of them to angrily yell out to Gadget.

Principal photography began in November 2001; the film was shot entirely in and around Brisbane, Queensland, Australia.