The opening sequence of the game finds Larry mowing the lawn of Eve, his sexual encounter from the ending of the previous game, implying the pair have remained together. However, this is quickly revealed to be an instance of an unreliable narrator, as Eve pulls into the driveway with only the vaguest recollection of who Larry is. Realising that his affair with Eve was merely a one-night stand, a distraught Larry wanders off, winning the Lottery as well as a free vacation after stumbling into a rigged dating game show. During his preparations for the cruise ship, a microfilm falls into Larry's hands by mistake; this attracts the attention of the KGB as well as the mad scientist Dr. Nonookee (a pun on "no nookie"), who both want to recover the film.
On the cruise ship, Larry discovers that the woman who mistakenly chose him in the dating show let her mother go with Larry, so he makes preparations in order to escape her; he stops the ship and escapes on a lifeboat. Days later he is washed off a resort on a Hispanophone Pacific island. As KGB agents block the way to the Airport, Larry desses up as a woman and pass through.
As the landing of the airplane will bring Larry to the agents, he opens the door and escapes the plane with a parachute. He will fall in the jungle of a virgin tropical island, Nontoonyt, where Dr. Nonookee has his base of operations. Passing through peris in the jungle, Larry meets Kalalau, the daughter of chief Keneewauwau, who explains him that Dr. Nonookee prevents a company to invest on the island and develop it as a resort island. In order to marry Kalalau, Larry infiltrates the volcano and accidentally causes the death of Dr. Nonookee, liberating the native women he had hypnotized as slaves, including "Polyester Patti". In the final cutscene, Larry marries the chief's daughter, the witch doctor rejuvenates him, and he makes love to Kalalau as the volcano explodes.
Throughout the adventure there are recurring themes that contribute to the comedic effect, like visitation to identical barber shops in almost each location Larry visits; one of them is tended by Rosella of King's Quest IV: The Perils of Rosella.