In the past, Alice notices a golden compass that Cyrus's mother gave to him. He hasn't always been a genie. He was human long ago. The compass always provided Cyrus great comfort while in his bottle. As long as he had it, he believed his mother was out there somewhere. His reminiscing is cut short when men bearing swords approach. Alice and Cyrus quickly best them in a brief battle. The men flee into the forest. But Alice is wounded. She collapses in Cyrus's arms.
In the present, Alice sees guards who are on the hunt for Cyrus. She knows her true love is headed to the Outlands. It's where they promised to meet if anything ever went wrong. Too bad Cyrus falls into a trap before he gets there. One of the Tweedles literally hears through the grapevine that the genie has been captured. He then sees his Tweedle brother handing over a small bag to Jafar. He has no idea what's inside. The loyal Tweedle relays this info to the Red Queen, who rushes to open a checkerboard box. The blood in her face drains when she see that whatever was inside is now gone.
Before heading to the Outlands, Alice wants to stop at the White Rabbit's house. She needs his help, as he's their only way out of Wonderland. She believes there's a reason he betrayed her. We jump back in time to the day Alice was wounded in the swordfight. Cyrus brings her to the White Rabbit's house where Mrs. Rabbit (voice of Whoopi Goldberg) takes control of the situation. In the present, Alice finds a disheartened White Rabbit. The Red Queen has his family. Everything he's done has been to keep them alive. Alice wants to rescue them. The Knave has an idea where they are stashed.
Jafar gazes at the genie bottle the disloyal Tweddle swiped for him. He's pleased until he realizes the item is just a cheap imitation. A furious Jafar smashes the bottle into pieces. In the woods, the Red Queen picks up Cyrus. They travel to the Knave's old home-the one he had when he was known as Will Scarlet. This is where the real genie bottle is hidden. Back at the queen's palace, Jafar finds the head of the disloyal Tweedle waiting for him in a box. He knows the queen is onto him. Jafar heads off to find her, but not before destroying her castle. The war is on.
In the past, the White Rabbit lets Cyrus know that Alice will recover from her wound. He says she's always wanted a place to call home. He suggests the only way to truly protect Alice is to let her go. Cyrus meets with the Caterpillar because he knows the creature can make things disappear. He offers the golden compass, which is known as a Lost and Found. It points you to anything you lost in your life and wish to find again. Cyrus later leads Alice into his home which is invisible from the outside. They can go on adventures and always return there to be safe. Alice wants to know what he gave up to accomplish this, but Cyrus doesn't tell.
The Knave leads Alice to his old house. He finds the White Rabbit's family hidden inside. A happy reunion takes place. The family is together once again. The appreciative White Rabbit will now keep his promise to help Alice. They are off to the Outlands, as are Cyrus and the Red Queen. Jafar creates a magic storm cloud. He orders it to find the queen and kill her.
Alice steps into the invisible home from her past. She's disappointed that Cyrus isn't inside. He is outside though. Alice races into his arms. They share a long overdue kiss. The presence of the Red Queen cuts the magical moment short. Cyrus says she is there to help them. The Knave doesn't believe it. Neither does Alice until the Red Queen admits that what she truly wants is the Knave. She wants Will back. She would give up her crown to go back to a time when he loved her. The Knave assures her that will never happen.
Jafar's storm cloud tracks down the group. The Red Queen pleads with them to leave. Only Cyrus trusts her. Alice believes in her true love. She orders the White Rabbit to dig a hole. Jafar strikes from afar. The Knave is hurt bad. This causes Alice to collapse as well. Her first wish stated that if the Knave dies then she dies, too. Cyrus wants her to use her last wish to save herself. She can't do it. She can't put him in a bottle again.
The Knave still has the wish Alice promised him. He wishes to end her suffering. In doing so, he frees Cyrus from being a genie. Everyone is overjoyed. Everyone but the Knave. He's nowhere to be found. This is because he's trapped inside a genie bottle. The Knave lets out his standard "bloody hell" once he realizes what's happened to him. The bottle floats down a river. It disappears over a waterfall plunging into the great unknown.