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The film opens with Greg (Zachary Gordon) and his family attending a skating rink for the year's new Seventh Graders. Here he reunites with his best friend Rowley (Robert Capron) and classmates Fregley (Grayson Russell) and Chirag (Karan Brar). Greg then meets Holly Hills (Peyton R. List), who immediately becomes his love interest. Chirag then tells Greg of Holly Hills and says that he (Chirag) googled her. While attempting to skate with Holly, Greg's older brother Rodrick (Devon Bostick) intervenes, ending with their mother (Rachael Harris) speaking to him on the loudspeaker and further humiliating him by getting Greg's father (Steve Zahn) carrying him off the rink. As weeks go by, Greg's mom notices that the boys do not get along, and calls for a family meeting. She gives them a new incentive to get on together by rewarding them with "Mom Bucks", which they can trade in for real money. The boys eagerly accept and compete with each other to earn the Mom Bucks.
After a talent show is advertised on TV, the brothers see this as a big opportunity, Rowley suggesting he and Greg perform magic tricks, whilst Rodrick sees this as his band's big break. Greg and Rowley film Rowley lip-synching "Tik Tok" by Ke$ha and upload it to YouTube, which becomes an online hit, although only for two days.
On Sunday, the Heffley family goes to church. Greg is extremely reluctant to go inside, as a melted 3 Musketeers bar, intentionally placed on his seat by Rodrick, has stained his trousers. Greg's mom uses her blouse to cover up the stain, but the cover-up backfires when the family go to take communion and Rodrick exposes Greg's pants and the boys ultimately end up in a scuffle on the floor.
As punishment the brothers are to spend a weekend together to bond, whilst their parents and youngest brother Manny leave on a pre-planned holiday for the entire family. Against his parents' orders, Rodrick hosts a party at the house and locks Greg up in the basement. Rowley comes to 'save' Greg, but Rodrick locks him up in the basement as well, until a call from their mother ends in Rodrick letting the two out in return for their silence on the matter.
The next day the two get a call from their mom informing them Manny is sick and they're returning early from their vacation. The house is trashed, and the boys only have an hour to clean it up and erase all evidence of the party before their parents arrive home. A door marked with 'Rodrick Rules' in permanent marker leads the brothers to replace it, before realizing it has no lock. Their mother notices it after a while, causing Greg to confess. However, in order to prevent Rodrick from getting angry at him (Rodrick previously had told him to "deny everything"), he says the party was only a band rehearsal, and the two escape punishment. Rodrick, thinking Greg did deny everything, tells Greg he's 'not as half as lame as he thought', and the two brothers become friends. Greg asks Rodrick for advice on Holly Hills, but his attempts fail and embarrass him instead.
The boys, as friends, go out for a night of fun, with their mother's warning to be home at 9. They go for smoothies then prank people by putting fake vomit on their cars. After surprising various people returning to their cars, the two put the fake vomit on one last car only to discover the owner to be Coach Malone (Andrew McNee), Greg's soccer coach. They run off with the coach chasing them. Rodrick willingfully helps Greg by pulling him out of the dumpster. The two run off to the mall with the coach still chasing them, and put their jackets on manaquinns, which he tackles. The two brothers go home, laughing. Greg and Rodrick return home,at 8:55,only to find that their father has inadvertently come across photos of the party. The boys are punished, Greg is grounded for two weeks with no video games, and Rodrick is grounded for a month and is not allowed to participate in the talent show.
The brothers instantly go back to their former relationship and spend the weekend with their grandfather in his retirement home. Whilst there, Greg runs into Holly, who was visiting her grandmother, and it is revealed they have identical families. Holly gives him some advice and the two part, Greg feeling more positive.
Greg then proceeds to write his positive feelings about Holly on his Diary which Rodrick gets ahold of and reads. Rodrick then threatens to tell Holly and runs towards the lobby to do so. Greg, despite being in his underwear, chases after Rodrick and manages to snatch away the diary and runs towards the bathroom and starts ripping out the pages of the diary and flushes them down the toilet. However, he discovers he is in the ladies' room, but manages to evade the angry women who think he is a Peeping Tom. He arrives back in only to find that Rodrick caught everything on tape via security camera and threatens to show it to everyone.
At the talent show a few nights later, Rowley's performance is unable to take place, as his eight-year-old assistant Scotty gets stage fright. Greg's mom says he will do the show with Rowley, but Greg refuses, saying he doesn't want to be embarrassed in front of Holly. Greg notices Rodrick is about to cry because he can't play. Rodrick notices his band members are motioning him to come. Greg follows and witnesses how Rodrick's band members kick him out of the band he created. Greg then bargains with his mom to allow Rodrick to perform, if he will perform with Rowley. Mom accepts the bargain.Greg sees Rodrick thanking his mom, then he sees Gregs and nods at him for letting him play. The Magic show is a hit with the audience and Holly Hills meets Greg backstage whilst other girls are getting Rowley's autograph and tells him she loved their show. Rodrick and his band perform, and sing their song Explöded Diper. The crowd isn't impressed, until they see Greg's mom dancing and dance along. Rodrick gets to perform, Greg's mom is happy and overall, Greg is happy having fixed his problems with his family.
The film ends with Rodrick driving Greg to school. Rodrick tells Greg that it was cool of him to let him play last night. The boys forgive each other, then Rodrick gives Greg the tape back, telling him not to talk about it or he'll put it on YouTube. As Greg arrives at school, Rodrick playfully then calls Greg "doofus" and they both smile at each other. Then Greg says "Later buttbrain" and the two boys create a new friendship by realizing it's fun to have a brother. At the end Rodrick informs Greg that he spilt Juice on the sofa and blamed on him. Greg gets him back by putting the video of him in the talent contest on Youtube and calls it "Lame Band with Crazy Dancing Mom", then Rodrick shouts that he will kill Greg.
