At the school pep rally, Shrek tells Artie he has been chosen to be king of Far Far Away. The trio journey to Worcestershire Academy, an elite magical boarding school, where they discover Artie is a scrawny, 16-year-old outcast. As they sail away, Fiona reveals to Shrek that she is pregnant, much to Shrek's horror, because he believes he is incapable of raising children. Shrek, Donkey, and Puss in Boots set out to retrieve Artie.

Meanwhile, Prince Charming, vowing to avenge the death of his mother, the Fairy Godmother, and become king, goes to the Poison Apple tavern and persuades the fairy tale villains to fight for their 'happily ever after'. With his dying breath, Harold tells Shrek of another heir: his nephew and Fiona's cousin, Arthur 'Artie' Pendragon. Some time after the events of the second film, Shrek and Princess Fiona are to succeed King Harold, but Shrek's attempts to serve as the Regent during Harold's medical absence end in disaster, since he has no interest in being king of Far Far Away. The sequel, Shrek Forever After, was released in May 2010.

It was nominated for the Best Animated Film at the 61st British Academy Film Awards.

Despite mixed reviews, the film was a commercial success, grossing $813 million worldwide on a budget of $160 million, becoming the fourth-highest-grossing film of 2007. Shrek the Third premiered at the Mann Village Theatre, Westwood in Los Angeles on May 6, 2007, and was theatrically released in the United States by Paramount Pictures on May 18, 2007. Shrek has no interest in ruling the kingdom and attempts to convince Fiona's underachieving 16-year-old cousin Artie to reign instead. In the film, Prince Charming is plotting to overthrow Shrek and Fiona, who have inherited the throne following King Harold's death. The film features Mike Myers, Eddie Murphy, Cameron Diaz, Antonio Banderas, Rupert Everett, Julie Andrews, and John Cleese reprising their voice roles from the previous films, along with new additions Justin Timberlake as Arthur Pendragon and Eric Idle as Merlin. Seaman, Miller, and Aron Warner, the film is set after the events of Shrek 2 (2004) and is the third installment in the Shrek film series. Directed by Chris Miller (in his feature directorial debut) and co-directed by Raman Hui from a screenplay by Jeffrey Price, Peter S. Shrek the Third (also known as Shrek 3) is a 2007 American computer-animated comedy film loosely based on the 1990 children's picture book Shrek! by William Steig.

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