Detective Roger Murtaugh turns fifty years-old and is worried about himself getting old during his life as LA police officer. On the other, the suicidal Detective Martin Riggs is under depression to the recent death of his wife. After an incident during a drug bust, Riggs is transferred to Homicide division due to his behavior and he is partnered with Murtaugh. Now, the two detectives investigates the recent death of Murtaugh's old friend's daughter and they are confronted by corrupt mercenaries who had been associate with the father of the daughter.
L.A.P.D. Homicide Sergeant Roger Murtaugh is worried about getting old, having recently celebrated his 50th birthday. He receives a message from Michael Hunsaker, an old Vietnam War friend who Murtaugh realizes he has not seen in over 12 years. Before he can meet him, he is called to investigate a suicide and learns that the victim is Hunsaker's daughter, Amanda. Elsewhere, L.A.P.D. Narcotics Sergeant Martin Riggs, who is suicidal following the recent death of his wife in a traffic accident, nearly kills a disarmed suspect after flying into a psychotic rage during a drug bust. Wary of his behavior, Riggs' superiors transfer him to Homicide, making him and Murtaugh reluctant partners.
Amanda's autopsy results show that she had taken drugs laced with drain cleaner. Even though she jumped to her death, she would have died within minutes anyway – making her death a homicide. After informing her distraught father, who claims he was trying to contact Murtaugh to help Amanda get out of the underworld of drugs, prostitution and hardcore pornography, Riggs and Murtaugh question a pimp Amanda was connected to. Finding a drug lab on the premises, they engage in a brief gunfight, killing the pimp (which leads to respect between Murtaugh and Riggs after he saved Murtaugh's life). Having found the drugs and with the pimp dead, Murtaugh assumes the case is now closed, but Riggs finds it suspicious that the only witness to Amanda's suicide was a prostitute named Dixie, who was working away from her usual "stroll". They deduce that Dixie poisoned Amanda and then posed as a witness to cover her crime.
Riggs and Murtaugh head to Dixie's home to question her, but her house explodes just as they arrive. Riggs—who served in the U.S. Army Special Forces during the Vietnam War—finds part of the bomb, a mercury switch which only a professional would use. A neighborhood child remembers seeing a man with blond hair at Dixie's earlier who had a Special Forces tattoo similar to Riggs's own. Seeing a connection, they deduce that Hunsaker knows more than he has admitted and Murtaugh confronts him at Amanda's wake. Hunsaker admits that for more than two years he has been involved in a heroin-smuggling operation run by former-special operations forces from the Vietnam War, known as "Shadow Company". The scheme is masterminded by a retired general, Peter McAllister —the former commander of Shadow Company—and his chief enforcer, Mr. Joshua. Hunsaker was laundering the profits through his bank. McAllister had ordered Amanda's murder when her father, Michael, unsuccessfully tried to alert Murtaugh to the scheme in an attempt to get out of the business. As Murtaugh attempts to get Hunsaker to reveal the entirety of his operation, Joshua makes a surprise appearance in a helicopter and shoots Hunsaker several times around his chest, killing him. They escape as Riggs tries to shoot at the helicopter, which fails.
As Riggs and Murtaugh attempt to investigate Michael's connection, Joshua and other members of Shadow Company shoots Riggs through drive-by. This fails since Riggs wore a bulletproof vest, though he is bruised and enraged. Riggs and Murtaugh arrives at the Murtaugh residence, finding that the Shadow Company had kidnapped Rianne. Using Riggs's presumed dead status to their advantage, Murtaugh agrees to meet Shadow Company at El Mirage Lake to exchange himself for Rianne. When they refuse, Murtaugh threatens himself, Rianne and the Shadow Comapny with a gernade. Joshua shoots Murtaugh in the arm and reveals that the gernade is actually a smoker. Riggs shoots members dead from a distance, Roger attempts to make Rianne flee, but ultimately all three are captured. McAllister tortures Murtaugh for information regarding the heroin shipment by having his henchmen beat him and rub salt into his bullet wound. McAllister demands to know which of their drug shipments have been compromised eventually threatening Rianne when Murtaugh refuses to give in. Joshua has Riggs brutally tortured with electric shocks for information, but Riggs later escapes and then rescues both Murtaugh and Rianne. The pair then fight their way free of their prison, finding themselves in a downtown L.A. nightclub. Riggs chases Joshua on to the street and attempts to cut him off on the freeway, though Joshua ultimately escapes. Murtaugh finds McAllister trying to flee in his car. Taking out McAllister's driver, Murtaugh watches as the car crashes on Hollywood Boulevard and is destroyed (along with the heroin shipment) by a box of live hand grenades. Riggs and Murtaugh then go to Murtaugh's home, knowing Joshua will go there to attack Murtaugh's family, who are absent. While Joshua is arrested and led away without incident, Riggs, wanting revenge, proposes "a shot at the title", which Joshua eagerly accepts. Sanctioned by Murtaugh, Riggs beats Joshua in hand-to-hand combat on the front lawn. As he's being arrested, Joshua overpowers two deputy officers and attempts to shoot Riggs. Riggs and Murtaugh both draw and fire, killing Joshua.
After a visit to his wife's grave, Riggs spends Christmas Day at the Murtaugh home with his new partner's family; Riggs brings his dog Sam to be a friend to the Murtaugh family cat, Burbank. Riggs also gives Murtaugh a symbolic gift: an unfired hollow-point bullet which he had been saving to commit suicide, as he does not need it anymore
Murtaugh: I'm too old for this shit!
(while Riggs savagely mumbles under his breath as he points a gun at one of the drug dealers)
Narcotics Officer #1: Riggs! It ain't worth it. (takes the drug dealer away)
Murtaugh: (to Joshua) Looking for your general friend? He's barbecuing his nuts of Hollywood Boulevard. (takes off Joshua's coat)
Riggs: (to Joshua) What do you say, Jack? Would you like a shot at the title?
Mr. Joshua: Don't mind if I do.
Murtaugh: No way you live. No way.
Riggs: (draws his gun after slapping three drug dealers 'Three Stooges' style) That's a real badge, I'm a real cop and this is a real fucking gun.
- The only film that does not feature Joe Pesci as Leo Getz.