Plot
Isabel Green is driven to her wit's end by her hectic life while her husband Rory fights in World War II. Between trying to keep the family farm up and running and her job in the village shop, run by the slightly mad Mrs. Docherty, she also has three boisterous children to look after, Norman, Megsie and Vincent.
When Isabel's children's two wealthy, but pompous and snobby city cousins, Cyril and Celia, are evacuated to live with them in the countryside, they start fighting with them, only adding to Isabel's problems. So, the magical Nanny McPhee arrives to help.
The children at first do not listen and carry on fighting, which Nanny McPhee soon puts a stop to with her magic. Meanwhile, Isabel's brother-in-law Phil has gambled away his half of the farm, and is being chased by two hired female assassins working for casino owner Mrs. Biggles.
Phil desperately attempts to make Isabel sell her half of the farm, using mean and spiteful schemes to leave her no choice. One of them, setting loose the litter of piglets to be sold to a neighbouring farmer, is discovered by the children, leading them to bond as they work together to fix it.
Isabel takes everyone on a picnic as a show of thanks, during which Mrs. Docherty's ARP Warden husband warns them about bombs and relates how he imagines a pilot might accidentally release one, and Phil subsequently delivers a telegram saying Rory was killed in action.
Everyone believes the news except Norman, who is sure his father is alive because he "can feel it in [his] bones". He tells this to Cyril, who at first thinks he is just upset, but then agrees that Norman might be right. They then convince Nanny McPhee to take them to the War Office in London, where Cyril and Celia's father Lord Gray holds an important position, believing he will know the truth.
At first Lord Gray sneers at Norman's disbelief at his father's death, but after Cyril reveals that he knows he is divorcing their mother and blasts him for his neglect as a parent, Lord Gray investigates what has happened. While he is gone, Norman asks Cyril where he will live following the divorce; upon learning Cyril rarely sees either of his parents, Norman says that he and Celia are welcome to live permanently with the Greens.
Lord Gray returns and tells Norman that his father is merely missing in action, and that there is no record of a telegram being sent to his mother. After the boys leave, Norman deduces that Phil forged it.
While the older boys are at the War Office, Megsie, Celia and Vincent try to stop Isabel from signing Phil's papers and selling the farm by creating distractions, such as pretending that a mouse was in the kitchen. Just as she is about to finally do so, a German pilot accidentally drops a huge bomb on the Greens' barley field; it does not explode, but the fallout is strong enough to cover Phil's papers with ink.
When Nanny McPhee, Norman and Cyril return, Phil admits to Norman's accusation of forgery and is handcuffed to the stove by Isabel. The children go out to watch Mr. Docherty defuse the bomb, but when he faints, Megsie takes over, succeeding with the help of the other children and Nanny McPhee's jackdaw friend Mr. Edelweiss.
Nanny McPhee helps to harvest the barley with a little magic, saving Phil from Mrs. Biggles' hitwomen in the process. While everyone celebrates, Nanny McPhee begins to leave. Mrs. Docherty explains to the Greens how Nanny McPhee leaves when she is no longer needed, revealing herself as baby Agatha from the first film. Isabel and the children chase after her, only to see Rory, with an injured arm, making his way back to them. He runs to his family and they embrace.
In a mid-credits scene, Ellie, an elephant conjured by Nanny McPhee to share Vincent's bed, is seen enjoying the magically operated Scratch-o-matic invented for the piglets.
