The film begins with an American Special Forces unit capturing General Ivan Radek (Jurgen Prochnow), the dictator of Kazakhstan. Radek's regime had caused an enormous amount of bloodshed for Kazakhstan, and there was word that his stockpiling of nuclear weapons would have plunged the world into a second cold war. His capture was made through the joint cooperation of President James Marshall (Harrison Ford), and Russian President Petrov (Alan Woolf).
Several weeks after the capture of Radek, President Marshall visits Moscow, along with his wife Grace (Wendy Crewson) and daughter Alice (Liesel Matthews). While Marshall is praised for his help in freeing Kazakhstan from Radek's grip, Marshall surprises everyone (including his own men) by deviating from his planned speech. Marshall says that they were too slow to act, and vows to not have such a thing happen again.
Marshall, his family, and his men are then returned to Air Force One, which takes off on its return trip to Washington D.C. Unknown to the President or anyone else, a rogue secret service agent named Gibbs (Xander Berkeley) has secretly allowed access into the plane several men who are supporters of Generak Radek. Gibbs kills several agents in a crucial protective position on the plane and the hijackers, led by Egor Korshunov (Gary Oldman), don bulletproof vests and collect weaponry that is used by the Secret Service. Korshunov and his men quickly gain control of the plane, killing several Secret Service officers and capturing the 1st Lady and the president's staff. In the chaos, Marshall is ordered into an escape pod in the cargo hold.
Air Force One's pilots attempt an emergency landing at Ramstein Air Base, but are soon killed with one of Korshunov's men taking control of the plane. A group of F-15's are sent after Air Force One as an escort. The plane is piloted towards Kazakhstan, and Korshunov places a direct call to the White House, where Vice-President Kathryn Bennett (Glenn Close) and Defense Secretary Walter Dean (Dean Stockwell) listen to Korshunov's demands. Korshunov requests the release of General Radek, with the stipulation that a hostage will be executed every half hour until his demands are met. Shortly thereafter, the President's escape pod is found, but he is not inside. During the firefight, Marshall stayed aboard the plane, intent on saving his family, a fact which neither the White House or Korshunov are aware. Korshunov assumes that the President escaped Air Force One, while the empty pod's discovery by the White House has them speculating that Korshunov and his men have killed Marshall.
Bennett calls President Petrov, in hopes that he can release Radek temporarily (with the hope that once Ivan has released the hostages, they can quickly recapture him). However, Petrov is not willing to give into this request without proof that the President is alive. After 30 minutes, Korshunov calls the White House to find out if Radek has been released. When Bennett tries to stall for time, Korshunov execute National Security Adviser Jack Doherty (Tom Everett). Korshunov then has Grace and Alice brought to the cockpit, leaving several men to guard the rest of the hostages.
Marshall attempts to find his family, but almost is taken out by a henchman, before he kills him. Marshall returns to the cargo hold where he manages to find a cellular phone, and places a call to the White House switchboard. Marshall argues with the switchboard operator when she questions his claim to be The President, and he demands she trace the call. As she realizes that Marshall is who he says he is, one of Korshunov's henchmen finds Marshall. Marshall sticks the phone in his pocket. At this point, the call is transferred through to the White House situation room, and Marshall gives indirect orders for one of the F-15's escorting the plane to fire on them. Bennett relays the order, and the shockwave from the blast throws the henchman off-balance, allowing Marshall to kill him. Marshall then speaks directly to Bennett and the others, claiming they cannot give up Radek, and need to find some way to get the plane on the ground.
Meanwhile, Korshunov has found out about the killing of two of his men and has assumed there is a Secret Service agent hiding in the cargo hold. After having Deputy Press Secretary Melanie Mitchell (Donna Bullock) brought to the cockpit, he turns on the plane's speaker system, threatening to kill Melanie if the person in the cargo hold does not surrender. Painfully, Marshall does not comply, and Melanie's execution is heard throughout the plane.
In a storage fridge in the cargo hold, Marshall notices a punctured milk container, and gets the idea to cause the plane to leak fuel, which should force the plane to land. When the plane registers that it is leaking fuel, Egor sends two of his men to check on this. They are almost killed by Marshall, but as they go to fix the fuel leak, Marshall sneaks up to the main cabin, and subdues another henchmen.
The two then gain entrance to the room where the hostages are. Marshall claims he is not leaving without his family, but wants to save the hostages. Major Caldwell (William H. Macy) proposes that if they can get the plane to descent to 15,000 feet, and use the parachutes in the cargo hold, they can get off the plane. The secret fax message (the fax and phone lines are separate) is received by the White House, shortly after Korshunov calls demanding a mid-air refueling. Bennett attempts once more to negotiate for a hostage release by requesting they land the plane for refueling, but Korshunov's threat to kill a passenger every minute until they are refueled causes her to give into his demands. Bennett soon has to deal with the matter in another way, when CNN reports a rumor that Air Force One has crashed. Bennett goes before the White House Press Room to quell the rumor, and informs the public for the first time regarding the hijacking of the airplane.
A KC-10 is dispatched and soon after refuels Air Force One. Caldwell and several others activate the cargo hold doors, and numerous people begin dropping from the plane, activating their parachutes. However, the opening of the cargo doors is seen in the plane's cockpit, and several of Korshunov's men are sent to investigate. Finding the door locked, one of them uses an oxygen tank to blast the lock, causing a number of people to plummet out of the plane. The sudden blast causes the refueling effort to go wrong, and the KC-10 struggles to break free. However, this causes the fuel leaking from the plane to ignite and the refueling plane explodes.
Marshall just barely survives being sucked out the cargo hold, clinging to part of the cargo door. Caldwell manages to pull Marshall to safety, and they are soon taken hostage by Korshunov's men. Egor then calls the White House, announcing that he now has the President, and orders the F-15 escort to divert once they enter Kazakhstani airspace. Bennett immediately complies with this request.
Marshall is brought before Korshunov, who demands that Marshall call Petrov to release Radek, promising that they can go free once the General is released. Marshall refuses, until Korshunov threatens to kill Alice. Forced to save his family, Marshall gives in, and calls Petrov for the release of Radek. As Radek's release is broadcast through the plane's P.A. system, Korshunov explains further that he lied to Marshall. He further intends to turn Marshall and his family over to Radek.
During this time, Marshall secretly gets hold of a piece of glass, and cuts through his bindings. Marshall then attempts to subdue Korshunov, but is almost shot by one of Korshunov's henchman. The bullet meant for Marshall is taken by Agent Johnson. Marshall then manages to take out the gunman, but in the ensuing struggle, Egor escapes to the cargo hold with Grace. Marshall finds Korshunov wearing a parachute, but also throwing the remaining chutes out the open hold door. Korshunov mocks that with no one to fly the plane and no parachutes, he has won. His short-lived victory is enough time for Grace to distract him, before Marshall tackles Korshunov. As they struggle, Marshall wraps a strap around Korshunov's neck before activating his parachute. The strap snaps Korshunov's neck, killing him as he is pulled out the cargo hold door.
Marshall manages to call Petrov and halt the release Radek. However, Radek makes a run for it when ordered to halt, and is killed. Marshall manages to get assistance from a friend in the White House on how to pilot Air Force One, with Caldwell serving as co-pilot. The plane heads for an airfield in Turkey, but is soon intercepted by some rogue MIG fighters piloted by Radek loyalists. The F-15's that turned away at Kazakhstan's borders move in to intercept the MiGs. Most of the MiGs are destroyed by the American pilots but Air Force One loses an engine and suffers major damage to its tail gear, preventing a safe landing.
With no way to land and the plane losing fuel, a C-130 Hercules is routed towards Air Force One, and a mid-air "zipline" rescue is put into effect. Though efforts are made to save Marshall first, he demands that his wife and daughter be transferred first. The wounded Agent is the third person across, but due to Air Force One's continued engine failure and rapid descent, only one more person can be rescued. Marshall refuses to leave the other men behind, but his words are interrupted as Agent Gibbs shoots the zipline attendant, and also kills Caldwell. Both Gibbs and Marshall fight for the zipline strap, with Marshall just barely getting it attached when the zipline breaks free from the doorframe, leaving Gibbs aboard the plane as it crashes and breaks up in the Caspian Sea.
Marshall continues to struggle to secure his zipline strap as the team aboard the Hercules reels him in. Once he is finally secure aboard the Hercules, the pilot changes the plane's call-sign from "Liberty 2-4" to "Air Force One" (this title applies to any aircraft that the President is aboard). As Marshall is reunited with his family, the F-15 squadron resumes flanking positions as they escort the First Family home.