-In this one, Riggs and Murtaugh must protect an annoying federal witness(Joe Pesci) from South African drug dealers hiding behind diplomatic immunity.
-LAPD Sgts. Martin Riggs and Roger Murtaugh engage in a car chase with other LAPD detectives. When their objective crashes, Riggs and Murtaugh search the car and find the trunk full of gold Krugerrands, which is basically South African money and this leads them to suspect that the criminals are from Apartheid South Africa. Later that night, Arjen Rudd(Joss Ackland), the minister of affairs for the South African Consulate, orders his head of security Pieter Vorstedt(Derrick O'Connor) to warn Murtaugh and Trish at his home to cease all investigating of the Krugerrands. They do so and in the wake of the attack, he and Riggs are reassigned to protecting a federal witness, Leo Getz(Joe Pesci) a loudmouthed accountant who decided to blow the whistle on his clients.
-After arriving at the hotel Leo is at, an assassin posing as a room serviceman enters the room and attempts to kill Getz. Riggs and Murtaugh save Getz and discover the formerly laundered funds are for the same drug dealers. Getz leads them to the smuggler's base of operations, a house on stilts. Riggs recognizes the assassin from the hotel, who tries to escape by stealing a tow truck parked outside. Riggs jumps in back and Murtaugh and Getz chase after. Later on, Riggs and Murtaugh return to the house with full backup. Attempting to arrest, Riggs and Murtaugh are confronted by Arjen Rudd and members of the South African Consulate. Vorstedt recognized Riggs but before he goes any further, Rudd invokes diplomatic immunity on behalf of himself and his clients, saying that Riggs could not even give him a parking ticket.
-Although ordered to leave Rudd and his associates alone, Riggs infiltrates the consulate building and catches the name Alba Varden, which Murtaugh seems to recognize. At the same time, Riggs begins to openly harass Rudd and also falls in love with his secretary, Rika van den Haas(Patsy Kensit), who strongly dislikes her boss and her country's policies. Riggs invites her to dinner at his trailer and they end up sleeping together.
-Fed up with Riggs, Rudd orders Vorstedt to brutally murder the LAPD detectives. While guarding Getz, Murtaugh views an old birthday video and learns that Alba Varden is the name of a South African ship currently at dock. He realizes that Rudd is planning to use the ship to smuggle his billions in drug money to Cape Town. At the same time, Getz is kidnapped from Murtaugh's unguarded car and and Murtaugh is attacked by 2 of Vorstedt's men but manages to injure them with a nail gun. On their part, Riggs and Rika manage to escape an attack by Rudd's men in helicopters. When he returns Rika to her house, he is knocked out and captured by Vorstedt. He confesses to murdering Rigg's wife years ago and drops him into the Los Angeles harbor in a straightjacket to drown. Riggs escapes by dislocating his shoulder, but finds Rika drowned. Vengeful, he calls Murtaugh and announces he is going after Vorstedt and Rudd. Leaving his own badge at the station, Murtaugh leaves to help Riggs.
-Meeting at Rudd's stilt house, Murtaugh leads inside to rescue Getz. Elsewhere, Riggs uses his truck to pull out the stilts, causing the house to collapse just as Getz and Murtaugh escape. They go to the docks where the Alba Varden is moored. They enter a cargo container and find it full of millions of dollars in drug money. When they are discovered, and the container sealed, they use a Mercedes within the container to bust out. Riggs and Murtaugh rappel down ropes onto the deck of the Alba Varden, fighting the crew in a firefight, killing them one by one.
-Eventually, Riggs runs into Vorstedt, and they engage in hand to hand combat which ends with Riggs dropping a cargo container on Vorstedt, crushing him. Rudd appears from a balcony on the Alba Varden and shoots Riggs from behind before Murtaugh draws his gun and attempts to arrest him. Rudd holds up his ID and says "Diplomatic Immunity". Murtaugh shoots him in the head, saying "It's just been revoked." While waiting for the LAPD, Murtaugh tends to Riggs.