Plot

The Hong Kong supercop must stop a group of blackmailing bombers, while the villains of Police Story (1985) are out for revenge.

Despite his success at apprehending criminals, Kevin Chan's unorthodox approach to his work as a police officer sees him demoted to the traffic branch. Despite this, the man he put behind bars is now out of prison, and has vowed to make his life a misery. While this crime boss his harassing Kevin and his girlfriend, the police are contemplating reinstating Kevin to help them fight a group of bombers attempting to extort $10 million from building owners.—Murray Chapman <muzzle@cs.uq.oz.au>

Inspector Chan Ka-Kui (Jackie Chan) has been demoted to highway patrol as the result of his handling of his previous case (in the first Police Story movie), which involved the violent arrest of crime lord Chu Tao (Chor Yuen). Chief Inspector Raymond Li (Lam Kwok-Hung) & "Uncle" Bill Wong / Inspector Chou (Bill Tung) say that Ka-Kui destroyed a squatter village and leveled an entire mall, which caused a huge loss to the Government as they had to rebuild the entire village, as well as compensate the mall owners.

The new duty pleases his girlfriend, May (Maggie Cheung), who is glad that her boyfriend is no longer taking difficult cases and has more time to see her.

However, the happy mood changes when Ka-Kui is greeted by Chu Tao and his bespectacled right-hand man John Ko (Charlie Cho). It seems Chu Tao has received a falsified doctor's certification that he is terminally ill with only three months left to live. So, he's been released from prison, and he vows to make life difficult for Ka-Kui. John Ko and some henchmen show up at Ka Kui's apartment and intimidate him, baiting the policeman to attack. Later, May and her aunt (Lisa Chiao Chiao) are beaten by John Ko and his men. Ka Kui can no longer hold back, and he lashes out against John Ko and his men at a restaurant.

Ashamed of his behavior, Ka-Kui resigns from the Royal Hong Kong Police Force. He plans to take a 3-month trip to Bali with May. While he's at a travel agency in a shopping mall, some police officers see him and report to him that the mall is under a bomb threat. The officers ask for Ka-Kui's help. Unable to resist the urge to get involved in police work, Ka Kui tells the officers to sound the fire alarm and have the mall cleared and agrees to take responsibility for the decision. A bomb does indeed explode, and the entire mall is leveled by the blast.

The owner of the mall President Fung (Shan Kwan) receive a call demanding a $10 million ransom, and they will destroy more malls if the money is not paid within 24 hours. Ka-Kui is praised for his efforts, and he is reinstated and assigned to solve the case of the bombing. Due to this Ka-Kui is made to get off the plane when he was about to fly off to his vacation with May. But Ka-Kui is not told what it is about (and he took May's passport with him), and after he gets off, the plane takes off with only May.

Ka-Kui is intrigued by the case and knows that dynamite used in the explosion could only be either smuggled in or brought in for construction activities. Ka-Kui plants a covert listening device in the mall property company's office to try and learn more about the bombers.

Meanwhile May returns to Hong Kong after having been detained by Indonesian customs and immigration for more than 10 hours. She is livid at Ka-Kui and breaks up with him. John Ko ambushes Ka-Kui with his goons with an intention to breaking his limbs. But Ka-Kui is able to fight them and escapes with minor injuries. May reconciles with Ka-Kui as he also saved her from John Ko and his goons. Ka-Kui's traces a call made to Fung's office and tracks it down to a specific phone booth, but the suspect manages to escape. Ka-Kui then finds a lead to a person named Cheung (Johnny Cheung) claiming to sell dynamite in a bar. Under interrogation Cheung admits to selling dynamite and gives a list of his customers which includes Tall Pau Hung / The Polar Bear (Ben Lam). This leads to a suspect who is a deaf-mute named Dummy (Benny Lai) and is a fierce martial artist and explosives expert.

The bombing gang, aware that the police are on to them, plan a simultaneous bombing of the property company and the police headquarters. They double their ransom demand to $20 million and kidnap May, luring Ka-Kui into a trap in which he's strapped with an explosive vest and forced to pick up the extortion money from the property company.

However, after handing off the money, Ka-Kui is able to drive his car into a tunnel so that the bomb he's wearing can't be activated, and he strips off the vest. He then goes to rescue May, who's being held in a warehouse full of fireworks. Ka-Kui again faces the deaf-mute man, who throws small firebombs at him. Ka-Kui then gains the upper hand and brutally retaliates against the mute man, finally throwing him off a third story catwalk onto a pile of plastic drums below.

Ka-Kui then rescues May and departs the warehouse, just as it explodes in a huge ball of fire.