In Bilbao, Spain, MI6 agent, James Bond, meets with a Swiss banker to recover a large sum of money. The banker, however, plans to have James killed. James uses a flash grenade disguised as his sidearm to create a diversion and ends up holding the banker at gun-point. The banker had taken the money from another "00" and is about to tell Bond who the agent's assassin is when he himself is killed by a thrown knife from his secretary, the Cigar-Smoking Woman. Bond grabs the case of money and is about to escape when another man tries to shoot him; that man is hit by an unseen sniper. Bond escapes out the window.
At MI6 headquarters in London, Bond returns the money to a wealthy man named Robert King. King and Bond's boss, M, are both present in M's office when Bond arrives. Bond learns from them both that King is building an oil pipeline through the Caucasus region and that the project has been threatened with destruction from several factions. King leaves and M gives Bond a glass of bourbon with ice. When the ice begins to bubble, Bond deduces that the money, which he'd handled, may itself be dangerous. In a nearby lab, the metallic security strip in one of the bills bursts into flame and the money explodes, killing King and blowing a large hole in the outer wall of MI6 HQ. Bond looks out through the hole and sees a woman on a boat who tries to shoot him with an automatic rifle. Bond takes a small, experimental, jet-powered boat belonging to Q and races after the woman, chasing her down the Thames. She tries several times to evade him but Bond catches up with her, finally destroying her boat near the Millennium Dome with a torpedo. The woman steals a hot-air balloon and floats upward, with Bond hanging on to one of the anchor ropes. The woman, the Cigar Smoking Woman who killed the Swiss banker, points her own pistol at the gas tanks on the balloon. Bond pleads with her not to kill them both, saying MI6 will protect her. She says no one can protect her from "him". She shoots the tanks and the balloon explodes, dropping Bond onto the Dome. The rolling landing fractures his collarbone, but he's still able to arrest his slide down the side of the Dome by grabbing onto the support cables.
At Robert King's funeral service, Bond notices that King's daughter, Elektra, is there. At an MI6 retreat in Scotland, Bond is examined by MI6 physician, Dr. Molly Warmflash, whom Bond seduces to get a passing diagnosis, allowing him to continue his mission. He goes to a briefing held by M who declares that her organization will not be terrorized. The likely suspect is a man named Victor Zerkas, aka "Renard", an internationally known terrorist who hires himself out as a mercenary. Renard was hunted by another Double-O who shot the criminal in the head non-fatally. The bullet, still lodged in Renard's head, has been destroying the area of his brain that controls his senses. Renard does not feel pain and is able to, according to the doctor, "push" himself to the limits of human endurance until the bullet eventually kills him. Renard had previously kidnapped Elektra and demanded a high ransom for her return. Elektra, however, was able to escape by seducing her guards and killing them. M now believes that Renard will want to kill Elektra out of revenge. Bond notices that the money he recovered for Robert King is equal to the ransom Renard had, and concludes that it's more a message from Renard than simply recovered money.
The MI6 doctor declares Bond fit for duty. Bond visits his armorer, Q, in his lab where he's given several tools for the mission. Q also introduces Bond to his protege, whom Bond laughingly designates, "R." Bond travels to Elektra's location near Baku, Russia, where she is overseeing the construction of her father's pipeline. Bond joins her on a brief inspection of the line in the mountains; the area is snowed over and they must ski to the right spot. They are attacked by a small group of men piloting "parahawk" vehicles. Bond is able to stop them, causing a few of them to collide with the landscape or each other and explode. The last explosion causes a small avalanche, burying Bond and Elektra. Bond deploys a rapid-inflating sphere to protect them, but Elektra panics from claustrophobia. Bond rapidly frees them from the snow and takes her back to her house to recuperate.
Seeking further information about Elektra's attackers, Bond goes to a casino owned by his old enemy, Valentine Zukovsky, to find out more about Renard and the men who attacked him earlier. Zukovsky tells Bond that Renard is a former KGB agent and may be working for Russian oil barons in the region who want the King pipeline destroyed. Bond and Zukovsky are summoned back to the main floor; Elektra has come to the casino to show she isn't afraid of her enemies and in hopes of winning a sizable amount of money using her father's standing credit. She loses on a high-low draw but is gracious in defeat.
In another location, Renard meets with a man named Davidov, Elektra's security chief, and a nuclear weapons scientist named Arkov, who also secretly works for Renard. Renard kills Arkov for failing to kill Elektra and orders Davidov to take Arkov's place on a secret mission the next day. Davidov agrees.
Bond slips out of Elektra's mansion and goes to Davidov's office, looking for more leads. When Davidov returns, Bond kills him and takes his place on a plane. Renard's men fly him to a remote region of Kazakhstan where an underground nuclear missile facility is being dismantled. Bond meets the head of the project, Dr. Christmas Jones, who is removing all the radioactive material from the warheads. Bond goes down into one of the silos and finds Renard and his men stealing an active warhead. Bond briefly captures Renard, and tries to force the criminal to reveal his plan. Renard resists, feeling no pain from Bond's blows. During the improvised interrogation, Renard uses a phrase Bond had previously heard from Elektra ("There's no point in living if you can't feel alive."). Bond also notices that one of Renard's men has removed the tracking card from the bomb. At that moment, Dr. Jones and a squad of guards come into the room and she accuses Bond of being an impostor. Bond is forced to his knees by Renard, who presses on Bond's injured collarbone. Bond and Renard and the others are about to be arrested when Renard's crew opens fire and try to escape in the melee. Bond tries to stop their escape but fails and he and Jones are trapped in the silo with a bomb planted by Renard. They manage to get out before the bomb explodes. Jones tells Bond they should be able to find the bomb Renard stole quite easily using it's tracking card but Bond shows her the card he'd taken from one of Renard's men.
Bond returns to Baku and harshly confronts Elektra about Renard using her motto and about the way Renard knew about Bond's injury. He concludes that Elektra and Renard are working together. When M arrives, Bond gives her the locator card from the bomb and tells her his theory. At that moment, an alarm sounds, indicating trouble on the pipeline. Renard has planted the bomb he stole on an inspection car that's traveling down the pipeline out of control. Bond and Jones use another of the vehicles to catch the bomb. While Jones dismantles the device she finds that only half of the plutonium from the original bomb is there. Bond tells her to let the explosive charge detonate to create the illusion that they were killed. It does and a large section of the pipe is destroyed. Back at Elektra's command center, she gives the visibly upset M a gift: her father's lapel pin. The pin King was wearing when he was killed was a fake that activated the detonator in the money Bond had retrieved. Elektra tells M that she killed her father out of revenge for using her to bait Renard. M is taken prisoner. Bond and Jones are puzzled as to why Renard only used half of the plutonium. Bond thinks he knows where to look for answers.
Bond once again visits Zukovsky, this time at his caviar factory. While trying to gather further information from Zukovsky, they are attacked by helicopters with dangling, circular saw blades. Bond is able to destroy one of the helicopters with missiles fired from his BMW, but the other chopper saws his car in half. Bond uses a flare gun to ignite leaking gas from a nearby pipe, destroying the second helicopter. In the confusion, Zukovsky falls into a pit of his own caviar. While he struggles to free himself, Bond asks him what his connection to Elektra is. The gangster tells him that he'd arranged for his nephew, a Russian submarine captain, to smuggle some machinery out of Istanbul for Elektra. Bond fishes Zukovsky out of the caviar and the Russian agrees to help Bond stop Renard.
In Istanbul, Bond and Zukovsky work to discern Renard's plan. They figure out that a nuclear explosion in Istanbul would contaminate the Bosphorus, preventing all shipping out of the Black Sea, and rendering the Russian oil pipelines useless. This would leave the King line with a monopoly. The submarine will be detonated using the stolen plutonium and will look like an accident. When Bond and Zukovsky determine where the sub is docked, near the Maiden's Tower, Zukovsky's assistant, Bullion, rushes out of the room, having planted a bomb. Bond and Jones escape and the bomb goes off, rendering Zukovsky unconscious. Outside the command center, Bond and Jones are captured by Renard's men.
Bond is taken to the Maiden's Tower and delivered to Elektra. Renard takes Jones with him to the submarine. Elektra has Bond shackled to an antique chair that causes asphyxiation and she proceeds to torture him. Suddenly, Zukovsky and his men take control of the tower, killing Renard's and Elektra's men. When Zukovsky reaches the room where Elektra has Bond, he sees his nephew's captain's hat on a nearby table, he demands it from Elektra. She shoots Zukovsky with a pistol hidden behind the hat and he falls to the floor. She turns her attention back to Bond, just long enough for Zukovsky to cock the rifle hidden in his cane. He first aims at Elektra, then turns toward Bond and fires, seemingly missing him. Zukovsky passes out, however his shot has freed one of Bond's wrists and he is able to free himself completely. Elektra runs off, Bond takes her pistol and chases her through the tower, stopping briefly to free M. He finds Elektra and demands she call off Renard in the submarine. She tells Bond he'd never kill her and that he'd miss her. She yells through a two-way radio for Renard to proceed with the plan and Bond shoots her, saying "I never miss."
Bond leaps from the tower and boards the sub, where Renard has extruded the stolen plutonium into a rod to be inserted into the sub's reactor. Bond kills most of Renard's men but the terrorist locks himself in the reactor room. Bond swims outside the sub, and enters the engine room through a pressure lock. Jones follows, but distracts Bond from his battle with Renard when she needs him to let her in before she drowns. As a result Renard is able to lock Bond and Jones away from the reactor chamber. Bond sees a way to eject the rod using a pneumatic control and the rod impales Renard, killing him. However, the reactor's cooling has been compromised and it will still explode, though not as seriously as Renard planned. Bond and Jones escape through a missile hatch to the surface and are picked up by a passing boat.
Back at MI6 HQ, M, Q and the rest of her staff scan satellite channels looking for Bond. They find him in Istanbul, in bed with Dr. Jones.