Rocky II opens with the ending of its predecessor, Rocky, with Apollo Creed (Carl Weathers) successfully defending his world heavyweight title courtesy of a split decision. Both fighters are taken to the same hospital due to the extent of their injuries from the match, where Apollo challenges Rocky (Sylvester Stallone) to a rematch in front of press. Rocky declines and declares his retirement, his decision supported by his girlfriend, Adrian (Talia Shire), and doctors, who reveal he will require surgery for a detached retina which could lead to permanent blindness. After Rocky is discharged from the hospital, he begins to enjoy the benefits of his life's changes resulting from the match: Rocky's new fame attracts him an agent who sees Rocky as a potential endorsement and sponsorship goldmine and his sudden wealth encourages him to propose to Adrian. She happily accepts and they marry in a small ceremony. Soon after, Rocky and Adrian happily learn that Adrian is pregnant with their first child.
Meanwhile, fueled by hate mail he has started to receive, Apollo becomes obsessed with the idea of a rematch which is the only way to prove his belief that Rocky's performance was simply a fluke. Determined to rectify his boxing career's only blemish, Apollo ignores all pleas by his friends and family to move on to other potential opponents and demands his team do whatever necessary to goad Rocky out of retirement and into a rematch.
Rocky at first seems unaffected by Apollo's smear campaign, but his inexperience with money causes him to run into financial problems. After largely unsuccessful attempts to find employment, Rocky visits Mickey Goldmill (Burgess Meredith), his trainer, at his gym to talk about the possibility of returning to the ring. At first, Mickey refuses, worried about Rocky's health, but changes his mind after Apollo publicly insults Rocky on television. News of the rematch quickly spreads with Adrian hearing about it through the news. She confronts Rocky about it and reminds him of the risk to his eyesight. Rocky argues he knows nothing else so this is the only way he can provide. Adrian, angry at Rocky for breaking his promise, refuses to support him.
Rocky and Mickey begin training, but it soon becomes apparent Rocky is lacking motivation. Adrian's brother, Paulie (Burt Young), confronts his sister about not supporting her husband, but she faints during the confrontation and is rushed to the hospital where she goes into labor. Despite being premature, the baby is healthy but Adrian falls into a coma. Rocky blames himself for what has happened and refuses to leave Adrian's bedside until she wakes up, and will not go to see his new baby until they can see it together. When Adrian comes out of her coma, she finds Rocky by her bedside and the couple are shown their new baby, a boy, which they name after Rocky. Adrian gives her blessing to the rematch which enables Rocky to refocus on his training and he quickly gets into shape for the fight.
The night of the fight arrives and Apollo has made a public goal of beating Rocky in no more than two rounds to prove the first fight going the full 15 rounds was a fluke. Rocky is not able to mount much of an offensive effort through the first two rounds but manages to survive them disproving Apollo's theory that the first fight's result was a fluke. As before, the fight once again reaches the 15th round, by which point Apollo has built a lead on points that Rocky cannot possibly beat. However, Apollo's obsession with knocking Rocky out (against the advice of his corner men) leads him to trade blows with Rocky despite his lead. Rocky lands a devastating blow on Apollo that knocks the champ down, but an exhausted Rocky loses his balance and falls to the canvas as well. Rocky manages to stand up before the referee counts to ten, while Apollo is counted out. Rocky thus wins the fight by knockout and becomes the heavyweight champion of the world. In his post-fight announcement Rocky, who has won back the respect of his fans and his wife Adrian, humbly thanks Apollo.