In 1985, a man named Russell Nash (Christopher Lambert
) is attending a wrestling match at Madison Square Garden in New York City. Looking somewhat forlorn, he feels a strange tremor and is compelled to leave. As he heads to his car, Nash is confronted by a man named Iman Fasil. Fasil identifies Nash by his real name, Connor MacLeod, and challenges him to a duel. Connor reluctantly accepts, and draws a katana. After a fierce sword fight, Connor decapitates Fasil and is enveloped by a mysterious energy which destroys several cars around him. He quickly hides his sword in one of the light racks hanging from the ceiling. Before he can leave the garage he is arrested by the police, who take him for questioning.The story goes back to Scotland in 1536, where an 18-year old Connor is seen with his fiance, Kate (Celia Imrie), and war-weary cousins Angus (James Cosmo) and Dugal (Billy Hartman). Their clan is preparing for war against their longtime rivals, Clan Fraser.
Detectives Moran (Alan North
) and Garfield (Edward Wiley
) are attempting to interrogate Connor. Garfield loses his cool and assaults Connor. This incident, coupled with lack of evidence, results in Connor's release. Forensics expert Brenda Wyatt (Roxanne Hart
) is intrigued by Fasil's sword, as it is a very valuable historical artifact, probably worth over a million dollars. Later, Connor returns to the garage to retrieve the katana, but before he does he sees that Brenda is looking at the crime scene. She finds some metal shards embedded in a nearby concrete column and saves them for analysis.The scene returns to the Highlands, where the armies of Clan Fraser and Clan MacLeod are preparing to face each other in battle. Clan Fraser's leader, Chief Murdoch (Alistair Findlay), has taken on the services of the Kurgan (Clancy Brown), a imposing mercenary in black leather armor. The Kurgan tells Murdoch that he wants to kill Connor on the battlefield and that nobody else should fight him. The battle begins and Connor, who has never been in battle before, is very scared. He soon finds nobody wants to fight him, but eventually the Kurgan finds him and easily defeats Connor by stabbing him in the chest, shouting "there are can be only one!" Dugal and Angus see the Kurgan preparing to decapitate Connor and attack him, forcing him to retreat. Connor is taken back to the village but is so badly wounded everybody assumes he is going to die.
We learn that Connor, in his Russell Nash persona, is an antiquities dealer and seems to be quite wealthy. A very pretty older woman named Rachel Ellenstein (Sheila Gish
) is his assistant. Later, the Kurgan, now wearing Judas Priest
stagewear and sporting a hideous scar on his neck, drives into the city after hearing of Fasil's death. Using the alias Victor Kruger, he takes up residence at a seedy motel and assembles his sectional "bastard sword," made from composite alloys. He practices his technique, taking the occasional break for dalliances with prostitutes.
Connor follows Brenda to a bar where they strike up a conversation and Brenda becomes very interested in him. They both leave and as Brenda tries to follow Connor he is attacked by Kruger. They fight but Connor is at an obvious disadvantage without a sword. The fight is interrupted by a police helicopter and everybody flees.Connor has made a remarkable recovery and is now back to normal, in only a few days. While he is happy to be alive, his friends ostracize him. Kate says that his recovery is the work of the devil. Most everybody in the clan mirrors that sentiment. Eventually the townspeople form a mob, tie him to a pole, and take him out to be executed -- but Angus frees him, convincing the villagers to commute the death sentence in favor of exile.
Brenda has analyzed the metal fragments and discovered them to be extremely unusual. She makes a date with Connor and they plan to meet at her apartment. Although she tries to make it seem like it's only a date, she actually is trying to entrap him: she has a cassette recorder hidden in a drawer and also has a gun just in case. However, when Connor arrives he's immediately on to her and calls her out on this. Brenda insists that she only wants to know what's going on and that the shards of metal from Connor's sword date back several thousand years, but he tells her to stop digging and leaves.In 1541, Connor has settled in Glencoe, where he works as a blacksmith and is married to a woman named Heather (Beatie Edney). One day they are visited by a well dressed older gentleman (Sean Connery) carrying the katana that Connor uses in the modern era. The man identifies himself as Juan Sanchez Villa-Lobos Ramirez. He explains that they differ from normal men: they do not age, are immune to disease, and will only die if their heads are separated from their bodies. He proves this by knocking Connor (who cannot swim) off a rowboat. Connor does not drown, and actually marvels at some aquatic scenery before bobbing back to surface, seething with confusion and anger. He tries to attack Ramirez with this highland sword but fails; Ramirez simply tells him that they are ready to begin.
While training Connor in the finer points of swordsmanship, Ramirez explains a long cycle he refers to as "the Game," where immortals are compelled by an incomprehensible force to hunt each other down. When one immortal decapitates another, the winner receives a transfer of power called "the Quickening." The Game is destined to continue until only a few immortals remain, triggering "the Gathering", where the survivors feel an irresistible pull towards a far away land and fight until only one remains. The last immortal standing will receive the cumulative sum of every Quickening, which Ramirez cryptically refers to as "the Prize." Discussion soon turns toward the Kurgan, who is revealed to be the oldest and strongest of the immortals, descended from an ancient barbaric tribe from Kievan Rus, in the steppes of Russia. He must not achieve the Prize or mortals will be enslaved forever. Connor also learns that all immortals are sterile, and fears how Heather will react when she learns he cannot give her any children. Ramirez reveals that he has been married three times and his third wife, a Japanese princess named Shikiku (the daughter of the man who made Ramirez's katana), was the love of his life. Eventually, Shikiku died of old age, and he was devastated. He urges Connor to let Heather go, and foreswear future mortal relationships, to avoid the same heartbreak. Connor refuses.
One night while Connor is away, the Kurgan arrives, demanding to know where "the Highlander" is. Ramirez lies, telling him that he has already killed Connor. The Kurgan sees through the deception and attacks. A fierce battle ensues. Ramirez gets an early advantage, slashing deep into the Kurgan's throat (revealing how Kruger got the scar on his neck and how his voice was altered) and wounding him in the side. However, the Kurgan's rage and ferocity eventually tip the battle in his favor. He asks who Heather is and Ramirez again lies, saying she is his woman so that his enemy won't use her against Connor. He decapitates Ramirez and receives the Quickening. After it has surged through his body, he falls from the tower where he and Ramirez had battled. Heather approaches him, thinking he's dead, but he grabs her.
After the death of his mentor, Connor attempts to return to a normal life, but as Ramirez warned, Heather succumbs to old age while Connor remains youthful. On her deathbed, she thanks Connor for staying with her until the end, and ask that he honor her memory by lighting a candle on her birthday. After burying Heather, Connor plants his Scottish broadsword in the ground to mark her grave, appropriating Ramirez's katana as his weapon. He destroys all traces of his old life and leaves Scotland.
Connor meets an exotic-looking man named Sunda Kastagir (Hugh Quarshie
) in present-day Central Park at the Bow Bridge. It becomes apparent they are long-time friends as well as immortals. They talk about how few of them are left and say the time for the final battle is close. They also discuss the possibility that they might have to kill each other.Connor and Kastagir recall meeting in Boston circa 1783. Connor is about to duel a very snooty man and is so drunk he can hardly stand up, but he still attempts to fight. The other man easily defeats Connor by stabbing him, and quickly declares himself the victor. However, Connor gets up and wants to continue the fight. The man is stunned but resumes the fight, easily stabbing Connor again. A humorous situation ensues where the man repeatedly "kills" Connor and each time Connor gets back on his feet until he finally apologizes for insulting the man's wife.
After much investigation Brenda finds out that Connor should be dead -- Russell Nash is the name of a baby who died at birth. She confronts Rachel and in a flashback we learn that Connor rescued her from the Nazis when she was a child. Rachel tries to keep Brenda away, but eventually Connor explains to Brenda who he really is. He proves it to her by stabbing himself in the stomach. After this revelation Brenda and Connor become lovers, although Connor is reluctant, and the ghostly voice of Ramirez suggests that he let her go.
Elsewhere in the city, Kirk, a gung-ho ex-Marine with survivalist tendencies, sees Kruger and Kastagir dueling in an alley. Kruger kills Kastagir and receives his Quickening. Kirk, clearly freaked out by witnessing this event, shoots Kruger, who shrugs off the injury and impales him. Kirk survives, and gives the police Kruger's description. In response, Kruger alters his appearance by shaving his head and covering the scar on his neck with a safety-pin necklace.
Connor is at a church, lighting a candle for Heather's birthday. Kruger enters, revealing that Kastagir is dead and he and Connor are now the only immortals left. Kruger taunts Connor by telling him of his defeat of Ramirez and about raping Ramirez's wife. He then realizes that Heather was actually Connor's wife and had never told him about the rape. Connor is furious, but is reminded of the immortals' oldest rule: they cannot fight on holy ground. Kruger finds out that Connor is having an affair with Brenda and kidnaps her in order to draw Connor into the final fight. Connor accepts the challenge and kisses Rachel goodbye, telling her that Russell Nash dies tonight, and that she knew this day would come.
The two fighters meet on the roof of Silvercup Studios and an epic sword fight begins. Kruger tries to use Brenda to defeat Connor by tying her to a the studio's massive rooftop sign, but Connor manages to save her. The fight causes major destruction. Both fighters fall into a large warehouse which is surrounded by windows. After a climactic fight Connor defeats Kruger and experiences the sum of all quickenings, which destroys every window in the warehouse. The police assume that Kruger is the headhunter serial killer they were looking for, and that Nash was his final victim.
The last scene shows Connor and Brenda in the Highlands and it explains that the Prize gives Connor awareness of the thoughts of all people all around the world and allows him to exert some influence. As a result he can help people cooperate with one another. He is now also mortal, able to have children and grow old. Ramirez tells Connor that he now has power beyond anyone's imagination, and urges him to use it well.