An LA detective is murdered because she has microfilm with the recipe to make cocaine cookies. Two cops partner to find and stop the fiends before they can dope the nation by distributing their wares via the 'Wilderness Girls' cookie drive.
The crooks in London know how it works. No one carries guns and no one resists the police. Then a new gang appears that go one better. They dress as police and steal from the crooks. This upsets the natural order of the police/criminal relationship and the police and the crooks join forces to catch the IPOs (Impersonating Police Officers), including an armoured car robbery in which the police must help the gangs to set a trap.
Charles Dreyfus, who has finally cracked over inspector Clouseau's antics, escapes from a mental institution and launches an elaborate plan to get rid of Clouseau once and for all.
Frank Drebin is persuaded out of retirement to go undercover in a state prison. There he has to find out what top terrorist, Rocco, has planned for when he escapes. Adding to his problems, Frank's wife, Jane, is desperate for a baby.