The story begins on the night of December 14, 1987. As the song "Jingle Bell Rock" plays in the background, a pretty young blonde woman is lying on a bed in a high-rise suite, dressed in a sheer nightgown, one breast showing. She's high on cocaine and taking some pills as well. She finds her way over to the balcony, climbs onto the railing, pauses and then jumps, crashing down on top of a parked car.
L.A.P.D. Homicide Detective Sgt. Roger Murtaugh (Danny Glover) is home taking a bath. His wife and three kids come into the room with a birthday cake, singing happy birthday. It's Murtaugh's 50th birthday. When his daughter, Rianne (Traci Wolfe), observes that his beard is turning gray, he becomes concerned about getting old and he decides to shave his beard. When Rianne tries on a very revealing black gown that she tells her father is to be her New Year's Eve dress, he finds that distressing as well.
On the beach, a rough collie dog runs up to a trailer house. Inside is 37-year old L.A.P.D. Narcotics Detective Sgt. Martin Riggs (Mel Gibson), just getting out of bed. He sleeps in the nude. Riggs looks exhausted and on his short walk to the toilet, he grabs a cigarette and beer for himself, and tosses the dog, Sam, a treat.
Murtaugh's wife, Trish (Darlene Love), tells him that a Michael Hunsaker (Tom Atkins), has been calling for him for the past three days. Murtaugh and Hunsaker are old Vietnam War acquaintances, but Murtaugh has no idea what Hunsaker might want.
Riggs prepares for the workday, loading his revolver as he watches a small TV set. A commercial about the Super Bowl irritates him and he throws his beer bottle at the set, breaking the screen. He looks longingly at a wedding photo of him and his wife, Victoria Lynn, who died in a car accident at age 31 after they'd been married for 11 years.
Murtaugh goes to the police shooting range and his hand is shaking. It quickly calms and he shoots a few rounds, all well placed, so he's not feeling so out of sorts about his age.
Riggs responds to a Code 3 sniper call. The shooter is on the second floor of a building next door to a school. He shot a police officer and was shooting at pretty much any and everything else that moved in the area. An officer on scene tells Riggs that a SWAT team was supposed to be there at any moment. Riggs at first starts to leave, but then suddenly turns around, draws his weapon and marches straight up some steps and out into the yard below the sniper's location. He calls out to the sniper, who rises up and fires multiple shots at Riggs, missing, before ducking back down. When he pops back up, Riggs fires about 10 shots, killing the sniper.
Murtaugh responds to a call about the female jumper at the high rise. On the way there, he listens as a dispatcher reports there is a drunk and nude prostitute, Dixie (Lycia Naff), also at the scene. The dead woman is identified as Amanda Hunsaker (Jackie Swanson), daughter of Michael and Claire. Murtaugh realizes that it's his old war buddy, Michael.
Riggs' next task is to meet with three men selling cocaine at a Christmas tree lot. Posing as a buyer, he tells them he'll buy all they've got, for "100." They are very happy, figuring they are getting $100,000, but when Riggs counts out just one hundred dollars, they become irritated. Riggs produces his badge and tells them they are under arrest. One of the men calls the badge fake and accuses Riggs of being crazy. Riggs responds by launching into a Three Stooges routine, slapping a couple of the dealers and drawing his Beretta on them, demanding they lie down to be arrested. A gunfight ensues. Other undercover police officers appear, just as several other bad guys hiding behind some trees open up with guns. One of them misses Riggs and accidentally kills the bad guy Riggs had been talking to. Riggs shoots two of the bad guys before another grabs him and holds a gun to his head. Riggs then plays the part of a true psycho as he screams at the guy to shoot him. When the guy doesn't, Riggs head butts him, grabs the gun and seems intent on shooting the man in the head, but pulls back at the last second.
Arriving back home at his trailer on the beach, carrying a new TV set, Riggs asks Sam what he did all day, then lovingly calls him "a lazy son-of-a-bitch," as he prepares to make them both some turkey sandwiches.
Riggs becomes very sad as he stares at a photo of Victoria. He grabs his gun and inserts a hollow point shell, then places the end of the barrel against his forehead, pausing before he repositions the gun barrel inside his mouth and cocks the hammer. Tears flow as he seriously considers pulling the trigger and joining his wife in death, but he can't do it. He tells Victoria she'll have to wait.
Dr. Stephanie Woods (Mary Ellen Trainor), the police psychiatrist, wants Captain Murphy (Steve Kahan) to take Riggs off the street, advising him that Riggs is very likely suicidal and a danger to himself and others. The captain disagrees and refuses to act. He apparently believes Riggs is just trying to set himself up with a medical discharge and pension. Murphy coldly tells her that if Riggs kills himself, they'll know she was right.
The investigation into Amanda Hunsaker's death determines that she had been using cocaine and took some barbiturates that someone had laced with drain cleaner. So, even though she jumped to her death, she would have died within minutes anyway because of the drain cleaner. Plus, there was evidence that someone had been in bed with her that same night. As a result, her death is declared a murder.
Captain Murphy decides to reassign Riggs to work with Murtaugh in Homicide. As they are about to meet for the first time, Riggs pulls out his weapon to play with it at the police station. Murtaugh sees that and attempts to take down Riggs, thinking he's some nut with a gun. Riggs quickly incapacitates Murtaugh with a judo move, throwing him to the floor. Murtaugh is introduced to his new partner by a fellow officer.
Later, as the two walk to their undercover car, they compare firearms. Riggs uses a 9 mm Beretta. Murtaugh uses a more traditional 4" Smith & Wesson. Riggs doesn't miss the chance to refer to Murtaugh's weapon as an "old timer's" gun. Murtaugh says he also knows from looking over Riggs' personnel file that he knows some sort of martial arts. He figures they'll have to consider Riggs to be a "lethal weapon." Both Murtaugh and Riggs figured they are getting "fucked" by the system, evident in their being assigned as partners.
Mr. Joshua (Gary Busey) and Mr. Mendez (Ed O'Ross) meet outside a nightclub. Joshua takes Mendez inside to meet General Peter McAllister (Mitchell Ryan). McAllister heads up a group of former CIA and special forces men who now use their skills and former contacts in Asia to participate in the illegal drug trade. Mendez wants to arrange to purchase some heroine, but he's upset at his rude reception and isn't impressed that a bunch of mercenaries are doing the deal. To emphasize to Mendez that he should take them seriously, McAllister forces him to hold his own cigarette lighter under Joshua's bare arm, until it burns him. Joshua doesn't flinch from flame and grimaces, taking the pain. He informs Mendez that if he tries to screw with them in anyway on the planned transaction, he'll have to deal with Mr. Joshua.
Murtaugh goes to see Michael Hunsaker (Tom Atkins) and informs him that his daughter was actually murdered. He asks Michael why he'd been trying to contact him the past few days. Hunsaker tells him that he was trying to contact him to help Amanda get out of the underworld of drugs, prostitution and hardcore pornography that she'd become involved with. Hunsaker seems quite distraught that his daughter was murdered and he reminds Murtaugh that he owes him a favor, which Murtaugh acknowledges as a heavy debt. Hunsaker had taken a bayonet in the chest during the Vietnam war, saving Murtaugh's life in the process. He now wants Murtaugh to find his daughter's murderer(s) and kill them.
Murtaugh and Riggs receive a call to respond to the scene of a potential suicide jumper. At the scene, Riggs claims to have experience in suicide negotiation and goes up on the roof to speak to the jumper. He gets out on the ledge with the man. The man is very agitated and keeps warning Riggs to stay away and not touch him. Riggs offers him a cigarette, which the man accepts. Riggs makes as though to light the cigarette, then suddenly reaches out and snaps a handcuff on the man's arm, and then the other cuff to his own arm. He then throws the key down to the street. He tells the guy that if he jumps now, he'll have company and he'll have murdered a cop. The guy becomes even more agitated and is pissed at Riggs. Riggs asks the guy if he really wants to jump, then ok, and he launches himself off the ledge, taking the guy with him. Murtaugh, watching from below, says, "oh, shit!" They land on a huge inflated cushion and are unhurt -- Riggs had distracted the jumper long enough for the ground unit to inflate the cushion. On the ground, Riggs happily suggests to the guy that they go back up and jump again, but the guy is screaming for the police/firemen to get Riggs away from him.
Murtaugh is livid and drags Riggs over to a nearby shop where they engage in a shouting match about Riggs being reckless and having a death wish. Murtaugh tells Riggs that if he wants to kill himself so bad, then to do it. He then thrusts his gun into Riggs hand and pushes it up to Riggs' head, daring him to do it. Riggs starts to apply pressure to the trigger and Murtaugh has to put his hand in front of the hammer to prevent it from falling. At that moment, Murtaugh is convinced that Riggs really doesn't care if he lives, that he's truly psychotic and not just playing a game to qualify for a medical pension. Riggs stalks out of the storefront, muttering about getting something to eat.
Murtaugh speaks with Dr. Woods on a mobile phone and she confirms that he should be very worried about what Riggs might do out in the field. Murtaugh is very upset about a number of things now, his age, his partner and all the risks he has to deal with.
Murtaugh and Riggs finally break through some of the extreme tension that exists between them when Riggs finds out it Murtaugh had his 50th birthday and he offers to buy him a present, "if we live long enough." Riggs' joke makes Murtaugh laugh. They don't stop arguing though, as Riggs lights up a cigarette and Murtaugh tells him he doesn't want him smoking in the car. Riggs keeps smoking anyway.
Riggs and Murtaugh go to see and talk with a pimp that Amanda Hunsaker was associated with. They arrive at a gated community home, and come upon two girls crouched over a table with drugs on it. As they approach the girls, a man appears with a shotgun and takes a shot at them. Murtaugh shoots the man in the leg. As Riggs is securing the girls with handcuffs, Murtaugh approaches the man, at the same time letting Riggs know that because he shot the guy in the leg, and not killed him as Riggs would have done, they can now interrogate him. As Riggs is lifting the man to his feet, the man produces a handgun. Riggs draws his gun and shoots the guy before he can shoot Murtaugh. The man falls onto some plastic sheeting covering a swimming pool and gets tangled up and drowns before Riggs and Murtaugh can extract him. Although Murtaugh is upset that the man died, he's also grateful for Riggs saving his life.
Murtaugh takes Riggs home with him to meet his family and have dinner. The two youngest children, Nick Murtaugh (Damon Hines) and Carrie Murtaugh (Ebonie Smith) ask if Riggs is a crook. Rianne is enthralled by Riggs, something which Roger notices right away and is not happy about.
Murtaugh looks in the oven but isn't able to identify the substance in there cooking. His wife, Trish, who calls him "Sarge," informs him that she is cooking a pot roast. Murtaugh apparently doesn't think she's much of a cook and he later can't believe that Riggs thinks the roast was good. Riggs then admits that it wasn't.
At the supper table, the younger kids start making up a silly rap song. Roger joins in and everyone has a good laugh. Murtaugh takes Riggs outside to see his fishing boat. As he's working in the engine compartment, Riggs reaches over and starts the engine. Murtaugh jumps up and calls Riggs an asshole for scaring him.
Rianne asks her father for permission to go out with Mark, a boy that Murtaugh refers to as "the blonde with dimples on his face." Murtaugh reminds her that she's grounded for smoking a joint, so he says no.
Riggs tells Murtaugh that he has a nice family and prepares to leave for home. As he's leaving, he says, "you don't trust me, do you?" Murtaugh says, "if we make it through tomorrow without your killing anyone, including me, then I'll start trusting you." Riggs senses a need to get serious for a moment and responds by saying, "I'm good. In Laos I killed a guy from 1,000 yards, under windy conditions. It's the only thing I'm good at."
On the way home, Riggs stops and picks up a hooker on the street, paying her $100 just to go with him to watch the Three Stooges on his little TV.
Murtaugh opens a large envelope that came in the mail. Inside is a Palos Verde High School yearbook, from 1983, and a VCR. On the videotape is Amanda Hunsaker, half undressed and parading around with some other women. Murtaugh shuts the video off in disgust and notices that Amanda has a twin sister in the yearbook.
Murtaugh and Riggs go to the shooting range and Murtaugh is proud of the grouping he has on his first attempt. Riggs shoots and brings in his target, a much tighter clumping than Murtaugh's. Murtaugh decides to try again and fires just one shot at mid-range. It strikes the center of the outline of a man's head on the target. Riggs then sends his target way downrange and unloads his pistol. When it comes back, the head now has eyes, nose and a smiley face. Murtaugh can only sigh.
Having earlier found drugs at the pimp's home, and the pimp ending up dying, Murtaugh assumes the Hunsaker case was closed, but Riggs finds it suspicious that the only witness to Amanda's suicide was the prostitute 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.
Murtaugh and Riggs go to see Dixie. As they exit their car, there are four little kids who figure out immediately that they are cops and they start chanting, "you're gonna bust Dixie." As the detectives near the house, the house suddenly explodes and burns. The two quickly return to their car to call for an ambulance and the fire department. When one of the kids asks if Dixie might have been home, Murtaugh looks at Riggs, who nods in agreement.
Later, among the smoldering wreckage, Riggs finds the remains of a mercury switch, evidence of a professional explosives job, possibly by someone who with military training. Alfred, one of the kids, a six-year old boy, tells them he saw a man reading the meter a little earlier in the day while he was hiding under the porch. He described the man as tall, white, blonde and sporting an Army Special Forces tattoo, just like the one on Riggs arm. Riggs becomes very concerned and can be heard muttering to himself, wondering if the fire department has any openings. Riggs reflects a bit on the circumstances of what they might be dealing with: mercenaries and mercury switches.
Murtaugh goes to see Mr. Hunsaker at the bank where he works. He demands to know what Hunsaker is involved with that got his daughter killed. Hunsaker is reluctant to answer because he has another daughter he's worried about, but eventually he tells Murtaugh that for more than two years he has been involved in a heroin-smuggling operation run by a group of ex-CIA and special forces mercenaries that came from a unit called Shadow Company, operating under the guise of Air America, a CIA-fronted organization that ran their version of the Vietnam war from Laos. The scheme is masterminded by a retired general, Peter McAllister (Mitchell Ryan) the former commander of Shadow Company and his chief enforcer, Mr. Joshua (Gary Busey). Hunsaker was laundering the groups' 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, the window behind Hunsaker explodes and Hunsaker falls dead. Outside, perched in a helicopter, is Mr. Joshua with a large sniper's rifle in his hands. Riggs gives chase and fires multiple times at the helicopter, but without effect.
When Joshua informs McAllister that Hunsaker had been speaking with two L.A.P.D. detectives, McAllister orders Joshua to go after them.
That night, Riggs is out on the street talking to a prostitute, asking her if she knew Amanda Hunsaker, when Joshua comes flying by in a car, firing a shotgun at him. Riggs takes the blast in the chest and is thrown through a plate glass window, but as Murtaugh rushes up to help, it's revealed that Riggs is wearing a bulletproof vest and is just bruised and in pain. He also really pissed. He tells Murtaugh the shooter was the same guy that shot Hunsaker from the helicopter. Riggs tells Murtaugh that the bad guys now believe that he's dead, so maybe they can work a plan to take advantage of that.
Murtaugh receives a call of trouble at his home. He and Riggs rush to his home and break in the front door, finding a note that indicates the mercenaries have kidnapped Rianne. The phone rings and it's Joshua advising him to stay close to the phone for further directions.
Joshua, pretending to be a news reporter, calls and speaks with Detective McCaskey, asking him about the recent drive by shooting. The detective tells Joshua that Detective Riggs was killed in the drive-by. McAllister orders Joshua to find Murtaugh, but to take him alive. He wants to find out what Murtaugh knows about their impending heroine transaction with Mr. Mendez.
As Riggs and Murtaugh prepare for whatever lies ahead, Riggs tells Murtaugh that this time they do it his way, and shoot to kill. He says, "We're gonna get bloody on this one, Roger." Murtaugh asks Riggs, "Are you really crazy, or as good as you say?" Riggs tells Murtaugh he'll just have to trust him.
Joshua calls back and directs Murtaugh to meet them at El Mirage Lake, a dry lake bed near Victorville, CA, the next day. He tells Murtaugh that they just want to know what Michael Hunsaker told him, then they'll let Rianne go.
The next day, Murtaugh drops Riggs off about a quarter mile from the meeting site. Riggs is armed with a sniper's rifle and he takes a prone position in some dry brush and waits. Before long, a white limousine, a black SUV, and a helicopter all approach. A total of about 10 armed men exit from the vehicles and helicopter. Murtaugh demands to see his daughter. Rianne is pulled from a vehicle and Joshua exits from the other side.
One of the armed men demands that Murtaugh remove his hands from his pockets before they proceed. Murtaugh does so, and reveals that he's holding a grenade with the pin pulled. He demands that his daughter be released immediately, or they will all die. He explains that he realizes he and Rianne would be killed as well, but at least they'd die together. Joshua approaches Murtaugh and whips his arm up, revealing a gun that he uses to shoot Murtaugh in the shoulder. Murtaugh drops the grenade and everyone scatters, but the grenade turns out to be only a smoke bomb.
Riggs opens up with his weapon, shooting the two men on either side of Rianne with pinpoint accuracy, then the driver of the limo. Murtaugh yells at his daughter to get out of there, so she jumps into the car and takes off. Riggs shoots another of the bad guys and is able to get Joshua in his sights. As he about to pull the trigger, McAllister sticks the tip of a gun barrel against Rigg's head and orders him to move away from his weapon. Riggs surrenders.
The helicopter gives chase of Rianne in the limo, eventually causing her to high center the car and she is recaptured.
Murtaugh had taken refuge behind his car and then attempted to run away, but he is quickly captured.
Riggs acknowledges that he knows General McAllister and that he'd come across some of his Shadow Company "pussies" while in Vietnam. He tells McAllister that he's going to enjoy bringing him down.
Joshua is preparing to interrogate Riggs. His associate, an Asian man named Endo (Al Leong), is an expert at torture. They have suspended Riggs from some ropes around his wrists. He's shirtless and there's a shower of water cascading over him from above. Endo has the ends of some battery cables and a sponge in his hands. He touches them to Riggs torso, causing extreme shock and pain. Joshua had promised to kill Riggs quickly if he'd just tell him what Hunsaker had told them about the upcoming heroine shipment. Riggs figures he's in for a long night, because Hunsaker hadn't told them anything. Riggs finally falls unconscious and Endo tells Joshua that he believes Riggs doesn't know anything. Joshua orders Endo to go ahead and kill Riggs.
As Endo approaches to administer the final shock, Riggs suddenly comes to life and head butts Endo. He then lifts his legs up and wraps them around Endo's neck and breaks it. He quickly manages to escape from his bonds and goes to help Roger and Rianne.
McAllister has Murtaugh strapped to a chair and subjected to a severe beating, with salt poured onto his shoulder wound, but he is helpless to stop it because he had no knowledge of the details of the heroine transaction. McAllister, either not believing Murtaugh or not caring, prepares to harm Rianne when Riggs bursts into the room.
Riggs creates immediate mayhem, taking down and/or killing all but General McAllister, who runs and escapes. Riggs removes the bonds holding the Murtaughs and they all leave the building and head for the lounge that served as headquarters for the mercenaries.
Riggs shoots the bartender and two others, somehow avoiding harm to any of the many customers in the lounge. They see Joshua and he leads them out into the street to continue the fight. Joshua stops a car and pulls the driver out and takes the wheel. Roger turns Rianne over to the care of a uniformed officer who appears at the scene and joins Riggs in giving chase on foot. Murtaugh can't run very well, since he was injured, so he shouts at Riggs to cut over to the freeway and catch Joshua there. Meanwhile, Murtaugh decides to go find McAllister.
Riggs sees Joshua entering the freeway and fires his machine gun at the car, causing it to veer off the road briefly and burst into flames. Joshua keeps driving the car as long as he can, then abandons it and commandeers an Audi and takes off again. Riggs had made his way down to the freeway by then and he gets hit by a taxi, bouncing off the windshield and has to give up the chase.
General McAllister and his driver make to escape from the warehouse in their car. Murtaugh is waiting outside for them. He calmly stands and fires as the car approaches, killing the driver. McAllister leans over and takes the wheel. Murtaugh has to jump aside as the car speeds past. McAllister has no control over the accelerator and brake pedals, so he can only steer as the car enters a main street, where it's t-boned by a large bus and flipped over. The general is upside down, bleeding, surrounded by bags of drugs and several grenades. As McAllister is reaching, apparently trying to grab the grenades, they explode, destroying the car and him.
Riggs and Murtaugh are reunited at the crash scene. When Murtaugh learns that Joshua escaped, he tells Riggs they have to get back to Murtaugh's house immediately, as that's likely where Joshua will go. They grab another detective's car and take off.
Joshua does go to Murtaugh's house, which is being guarded by two uniformed officers in a patrol car. He pulls up to the police car and shoots both officers dead. He goes up to the house and uses his automatic weapon to blast through the door. No one is home. He finds a note stuck to the Christmas tree that says "Dear bad guys, no one here but us good guys." At that moment, the wall of the living room caves in and an empty police car crashes into the room, a police baton wedged onto the accelerator. Riggs enters the room immediately after that and sticks a gun to Joshua's head. Riggs tells Joshua that his "general friend had his nuts barbecued on Hollywood Boulevard." Riggs can see that Joshua can't stand that he's in the predicament he's in and is searching for some way out. He asks Joshua if he wants to "try for the title," via hand-to-hand combat. To allow that to happen, Murtaugh has to quickly take control of other arriving police and tell them to stay back, to let things play out.
Riggs and Joshua have a hell of a fight, with each alternately appearing to take control, only to have things switch around again. Police are all around, watching. A beam from a police helicopter shines down and a broken fire hydrant is spraying water over the entire area.
Riggs finally gets Joshua in a scissor-leg lock, but for some reason he decides not to snap Joshua's neck and lets go of him. As two officers move in to handcuff Joshua, he grabs a gun from one officer's holster and points it at Riggs. Riggs, who was being helped up by Murtaugh, quickly spins around. He and Murtaugh both bring their handguns to bear and they fire almost simultaneously, killing Joshua.
Riggs goes to visit Veronica's grave, cleaning some debris from it, then he tells her "Merry Christmas, I love you."
Riggs goes to the Murtaugh's home, the front of the house all patched up from the damage it incurred. Rianne answers the door and offers to go get her father. Riggs says no, that he just wanted her to give Roger something. He then hands her the single hollow point bullet that he'd reserved for killing himself. He tells Rianne to tell her father that he wouldn't be needing it anymore.
As Riggs turns to go, Roger chases him down. He tells Riggs that he has to stay there and help him eat the "world's lousiest Christmas turkey." Riggs agrees, and observes to Roger how his daughter seems to like him. Roger tells Riggs that if he tries anything with Rianne, he'll kill him. Riggs asks if he can bring a friend to dinner, then calls out to Sam. Sam comes running and once he's inside the house, the sounds of Sam's barking and Burbank's (the Murtaugh's cat) screeching can be heard, as the two get acquainted.