Ang Panday 2 begins with Flavio/Panday (Revilla) and Maria settling in the peaceful and quiet town of Matandang Kahoy. All is well until Lizardo returns and captures Maria. On his quest to save his lady love, Flavio crosses paths with Ariana whose father had been killed by Lizardo. As the two join forces, Ariana finds herself falling for Flavio. All this happens in a magical world filled with dragons, fairies and other mythical beings. According to Director Carlo J. Caparas who penned the story, the King of Philippine Movies himself, the late Fernando Poe Jr., would be impressed with the production of Ang Panday 2. FPJ had starred in the original Panday films, and had long been associated with the beloved Pinoy komiks character.

The adventures of Enteng Kabisote continue in this third film based on the TV series about a mortal and his magical fairy wife. In this installment, the wicked Satana sets her sights on Engkantada, and it's up to Enteng's family to band together to fight her evil influence. To complicate matters, Satana sends a lizard to pose as Enteng, and stubborn mother-in-law Ina Magenta stirs up her own special blend of havoc.