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Having lost the first Cannonball Run race, Sheik Abdul Ben Falafel (Jamie Farr) is ordered by his father (Ricardo Montalban) to go back to America and win another Cannonball Run in order to "emblazon the Falafel name as the fastest in the world." When Sheik Abdul points out that there is no Cannonball Run that year, his father simply tells him to "buy one."

To make sure his ulcer does not prevent him from winning, the Sheik hires Doctor Nikolas Van Helsing (Jack Elam), who teamed with JJ (Burt Reynolds) and Victor (Dom DeLuise) in the first race as his in-car physician. He brings along a blond-haired servant (Doug McClure), who receives numerous slaps in the face from both the sheik and his father. Most of the participants from the first race are lured back, including JJ and Victor, who have taken jobs working with a flying stunt crew.

In a subplot, Blake (Dean Martin) and Fenderbaum (Sammy Davis Jr) are in financial trouble with Don Don Canneloni (Charles Nelson Reilly), who in turn is in financial trouble with mob enforcer Hymie Kaplan (Telly Savalas). After the Sheik manages to bail out Blake and Fenderbaum by handing one of Don Don's thugs a stack of cash, Don Don hatches a plot to kidnap the Sheik in an attempt to extort money from him.

The race begins with JJ and Victor dressed as a US Army general and his private driver. They catch the attention of Betty (Marilu Henner) and Veronica (Shirley MacLaine), who are dressed as nuns for a musical, but willing to hitch a ride with JJ and Victor when they think the guys could become overnight millionaires. They do not lose their habits until later.

Don Don's enforcers continue to blunder one plan after another, with predictably slapstick results. The racers band together to invade the bordello. JJ, Victor, and Fenderbaum infiltrate it in drag, dressed as belly dancers. Others barrel in by car and rescue the Sheik, who is reluctant to leave since he has his pick of women there.

In the end, the Sheik bankrolls Don Don's bordello and then declares that he is upping the stakes to $2 million for the winner. All jump into their vehicles and make a dash for the finish line and avoiding some traffic patrollers. The Sheik, as it turns out, loses yet again (this time blaming the doctor who rode with him for injecting him with an unknown substance), but convinces his father that he will win the return-trip race, having hired the winner of this one. It turns out to be an orangutan with a penchant for destructive behavior and giving elderly ladies the middle finger.

Classic Cars featured in this movie