Dellaplane is killing auto union leaders so he can place one of his own men in charge. Jackson is cleared of Patrice's murder and kills Dellaplane. He gets his old rank back and the girl.
Two years ago, Detroit Police Lieutenant Jericho "Action" Jackson (Carl Weathers) was convicted of police brutality in connection to the aggressive arrest of sexual predator Sean Dellaplane, the son of automaker Peter Dellaplane (Craig T. Nelson). As a result, Jackson was demoted to Sergeant, lost his gun, and given desk duty. In the present day, two auto worker union leaders have been murdered by a team of hitmen known as The Invisible Men. Tony, another union leader and a friend of Jackson's, tells him that Peter Dellaplane is responsible. He is bumping off union leadership who is against him and his company, but he doesn't know why. He tells Jackson to look up Dellaplane's mistress, a heroin-addicted club singer named Sydney Ash (Vanity), but just after Jackson leaves, one of the hitmen shows up and kills Tony.
Later, Patrice Dellaplane (Sharon Stone), Peter's wife, overhears a phone conversation with his bodyguard talking about Tony's death as well as about O'Rooney, another union leader. She goes to Jackson and tells him what she heard, and that Dellaplane will be hosting the birthday party for the Union President, Raymond Foss. As they are leaving their meeting, she is nearly run over by a cab being driven by the hitman that killed Tony. Jackson gives chase, but the hitman gets away. That night, while Jackson is at Sydney's club, Patrice goes to Peter and tells him what she told Jackson. Peter promptly kills her, and his bodyguards, who are The Invisible Men, move her body to Jackson's apartment to frame him for her murder.
Back at the club, Jackson goes to talk to Sydney. Her bodyguard Mr. Edd won't allow it, and he and Jackson have a fight, which Jackson wins. He then takes Sydney to his place, but when he sees the police cars around his apartment, they go to her place. He turns on his police radio and learns about Patrice's death and that the cops are looking for him. Now at Sydney's apartment, the phone rings. Just as the answering machine picks up, a bomb explodes, and Jackson and Sydney flee the burning apartment and go to a flophouse run by former boxer Kid Sable, a childhood friend of Jackson's. The next morning, Jackson reveals to Sydney that he is a cop and he needs her help in arresting Dellaplane, but all she wants is her next hit of heroin. While she is detoxing at the flophouse, Jackson goes to his informant, and she tells him about The Invisible Men, and how Dellaplane is trying to establish a base in the union, but she doesn't know why either.
Jackson and a now-cooperative Sydney, who is starting to show feelings for him, are looking for O'Rooney. They meet, and Jackson learns that Union President Foss is to be killed at the party, and he will be the new president while taking Dellaplane's orders. The Invisible Men then show up and take Jackson and Sydney hostage. Dellaplane then shows up and tells Jackson he will be the one to kill Foss (actually a hitman disguised as Jackson), then he will be found dead with Sydney. Dellaplane then leaves with her, a suddenly disgusted O'Rooney, and some of the Invisible Men while the rest prepare to kill Jackson. Just then, Mr. Edd shows up, and he and Jackson kill The Invisible Men with the help of a flamethrower.
At the party, Jackson, Mr. Edd, and Kid Sable show up while the hitman prepares to shoot Foss. Jackson gets to the hitman just as he fires, killing Foss. Jackson then kills the hitman. O'Rooney yells out that Dellaplane ordered the hit, but he is then killed by one of The Invisible Men. As panicked party guests are fleeing the scene, Jackson runs into his former police partner Detective Kotterwell, who wants to take him in for the murder of Patrice. Just then, Sydney screams for Jackson as Dellaplane puts a gun to her head. Now knowing that Jackson is innocent, Kotterwell lets him go and gives him his spare gun. Jackson chases Dellaplane with his car though the house, and kills him as the rest of the police arrive. One of the arriving cops is his supervisor, who demands that the lieutenant have a report on his desk in the morning. Jackson then realizes that he just got his old rank back.
The movie ends with Sydney congratulating Jackson and kisses him.