The game begins with Chell waking up from a stasis bed and hearing instructions from GLaDOS, an artificial intelligence, about upcoming tests. Chell enters into sequential distinct chambers that introduce her to varying challenges to solve using her portal gun, with GLaDOS as her only interaction. GLaDOS promises cake as a reward for Chell if she completes all the test chambers. As Chell nears completion, GLaDOS's motives and behavior turn more sinister, suggesting insincerity and callous disregard for the safety and well-being of test subjects. The test chambers become increasingly dangerous as Chell proceeds, including a live-fire course designed for military androids, as well as chambers flooded with a hazardous liquid. In one chamber, GLaDOS forces Chell to "euthanize" a Weighted Companion Cube in an incinerator, after Chell uses it for assistance.

After Chell completes the final test chamber, GLaDOS maneuvers Chell into an incinerator in an attempt to kill her. Chell escapes with the portal gun and makes her way through the maintenance areas within the Enrichment Center. GLaDOS panics and insists that she was pretending to kill Chell as part of testing, while it becomes clear that GLaDOS had previously killed all the inhabitants of the center. Chell travels further through the maintenance areas, discovering dilapidated backstage areas covered in graffiti that includes statements such as "the cake is a lie", and pastiches of quotes from famous poets such as Henry Wadsworth Longfellow and Emily Brontë.

Despite GLaDOS's attempts to dissuade her with lies and threats, Chell proceeds and eventually confronts GLaDOS in a large chamber where her hardware hangs overhead. A sphere soon falls from GLaDOS and Chell drops it in an incinerator. GLaDOS reveals that the sphere was the morality core of her conscience, one of multiple personality cores that Aperture Science employees installed after she flooded the center with neurotoxin gas; with the core removed, she can access its emitters again. A six-minute countdown starts as Chell dislodges and incinerates more of GLaDOS' personality cores, while GLaDOS mocks and attacks her. After Chell destroys the last personality core, a malfunction tears the room apart and transports everything to the surface. Chell lies outside the facility's gates amid the remains of GLaDOS, but is promptly dragged away by an unseen robotic entity.

The final scene, viewed within the bowels of the facility, shows a candlelit Black Forest cake,[23] and a Weighted Companion Cube, surrounded by shelves containing dozens of inactive personality cores. The cores begin to light up, before a robotic arm descends and extinguishes the candle on the cake, casting the room into darkness. Over the credits, GLaDOS delivers a concluding report through the song "Still Alive", declaring the experiment to be a success.

In the Aperture Science Enrichment Center, player-character Chell wakes in a stasis chamber resembling a motel room. The complex has become dilapidated after what appears to be millennia of decay. Wheatley (Stephen Merchant), a personality core, guides her through old test chambers from the first game in an attempt to escape the facility after its reserve power is depleted. They accidentally reactivate the dormant GLaDOS (Ellen McLain) while attempting to restore power to the escape pods; she separates Chell from Wheatley and begins rebuilding the facility.

GLaDOS subjects Chell to new tests until Wheatley helps her escape again. They sabotage Aperture's production of turrets and neurotoxin to prevent GLaDOS from killing them, then confront GLaDOS and perform a core transfer; replacing her with Wheatley as the laboratory's controller. Wheatley, immediately driven mad with power, installs GLaDOS on a potato battery. GLaDOS tells Chell that Wheatley was designed as an "intelligence dampening sphere" to deliberately produce illogical thoughts and hamper her own intelligence. Infuriated, Wheatley inadvertently destroys the lift to the surface with Chell and GLaDOS inside, causing them to fall to the facility's abandoned lowest levels.

Chell retrieves the potato battery and they form a reluctant partnership to stop Wheatley before his incompetence destroys the facility. Ascending through laboratories built in the 20th century, they discover audio recordings by eccentric Aperture Science founder Cave Johnson (J. K. Simmons). The recordings reveal how Aperture slowly lost money and prestige throughout the decades, as its pool of test subjects was altered from "astronauts, war heroes, and Olympians" in the 1950s, to homeless people in the 1970s, and Aperture's own employees in the 1980s. In 1981, Johnson became mortally ill after ingesting Moon dust used to manufacture portal-conductive surfaces. His last request was for the mind of his assistant Caroline (McLain) to be transferred—by force, if necessary—to an advanced computer designed to store a human consciousness, which he had previously commissioned to save himself, creating GLaDOS. GLaDOS is troubled by the discovery that she is Caroline.

Chell and GLaDOS return to Aperture's higher levels, where they discover Wheatley's utter incompetence has brought the Aperture facility on the verge of catastrophic failure. Wheatley, after discovering Chell and GLaDOS had returned, decides to keep them alive as test subjects because the "franken-turret" cubes he created were ineffective at solving tests. GLaDOS later reveals that her body came built-in with a euphoric response to test completion that becomes less effective over time. Throughout the following chambers, Wheatley becomes increasingly frustrated with its dwindling effects.

Wheatley reveals that he has a "surprise" for Chell and GLaDOS, later tricking them into a death trap. He reveals that he had discovered the two robots from the Cooperative Testing Initiative, the game's cooperative campaign, making Chell no longer useful to him. She manages to escape from the trap right before its activation. The game's final levels are spent escaping from Wheatley's numerous attempts to kill them.

In the game's boss fight and ending, Chell confronts Wheatley and attaches corrupted personality cores (Nolan North) to force another core exchange and restore GLaDOS to authority. However, Wheatley demolishes the button necessary to initiate the transfer. As the facility crumbles, Chell places a portal on the Moon; she and Wheatley begin to be pulled into the vacuum of space. GLaDOS, having reasserted control over the facility, rescues Chell and abandons Wheatley to outer space. When Chell awakens, GLaDOS claims to have learned of humanity from the remnants of Caroline, but deletes Caroline's personality. Deciding that Chell is not worth the trouble of killing, GLaDOS frees her from the facility.

The cooperative story is chronologically set after the events of the single-player campaign, but players are not required to play them in order. Player characters Atlas and P-Body are bipedal robots constructed by GLaDOS. In the first four 'sets' of levels, the robots are sent on ventures into the depths of the Aperture facilities to recover and upload data disks. After completion of each mission, the robots self-destruct and are reassembled to complete the next.

At first, GLaDOS is excited about her non-human test subjects, but later becomes dissatisfied because the two robots cannot truly die, and at one point also gets uncomfortable with their close partnership. At the end of the story, the robots gain entry to "the Vault", a storage facility of thousands of humans placed in stasis. GLaDOS thanks the robots for their acquisition of new test subjects, and promptly destroys the robots.