-A new character comes in to this one, Internal Affairs Sgt. Lorna Cole(Rene Russo)
-LAPD Dets. Riggs(Mel Gibson) and Murtaugh(Danny Glover) arrive at an evcuated building believed to have a bomb in it. Against orders, they go in to investigate. Riggs decides to try and deactivate it instead of waiting for the Bomb Squad. Unfortunately he causes the bomb to detonate and the whole building to collapse. For this, they get demoted to uniform duty. While on street patrol, they discover an armored car being hijacked and they stop it. For their efforts, they are reinstated at Detectives by their boss, Captain Murphy(Steve Kahan). He introduces them to IA Sgt. Lorna Cole(Rene Russo) and informs them that the suspect they have in custody from the hijacking is a known associate of former LAPD Lt. and arms dealer Jack Travis(Stuart Wilson)
-Elsewhere, the other hijacker who escaped is brought before Travis who is doing a meeting with mobster Tyrone(Gregory Millar) to account for his actions which led to police attention. Travis has his men throw the hijacker into a pit of cement as a way of showing what happens to anyone who double crosses him. Travis goes to county lockup and using his still active police badge gains access to the other hijacker to kill him. Travis is unaware that he has committed this action on camera and when Cole and Riggs arrive, they can ID him using the camera.
-Back at police HQ, Riggs, Murtaugh and Cole are reviewing the footage when interrupted by Leo Getz(Joe Pesci) who has dropped by to visit his old buddies. When the detectives put the footage on pause to talk to Leo, he manages to recognise Travis and tells them where he can be found. They attempt to arrest Travis, and they believe they may have a lead to his arms trafficking warehouse. On the way to meet up with Cole at the warehouse, Murtaugh and Riggs come under fire from Tyrone's thugs. Murtaugh kills one of them and it turns out one of them is a friend of his son, named Darryl. Visibly stressed, stays at the scene and Riggs continues on to meet Cole. At the warehouse, Riggs and Cole are attacked by Travis's henchmen and they gain the upper hand, secure the arms shipment and the same evening, begin to fall in love. After learning from Rianne that Murtaugh has become withdrawn following the shooting of Darryl. On the boat parked in the driveway, Riggs and Murtaugh talk. At Darryl's funeral, his father asks Murtaugh to catch the man who put the gun in his son's hands. Riggs, Cole and Murtaugh arrest and interrogate Tyrone after learning his weapons come from Jack and they bust a garage with more people working for Travis
-Travis, no longer able to secure weapons through police arms dumps due to an exposure on the footage from the murder, has Captain Murphy kidnapped in a bid to use his clearance to gain access to the arms dumps. After having Leo work on getting info on a construction site the garage workers were connected to, Riggs, Murtaugh and Cole realize Travis's plans when Cole notices info that has been hacked from the police computer. A major firefight breaks out at the dump, with most of Travis's men being killed, and him escaping.
-With the details from Leo, the 3 depart for the site. At the construction site, they come under heavy fire and eventually manage to destroy most of the site and Travis's men. He is shot and killed by Riggs with his own armor piercing bullets, after he wounds Cole. She survives because she took extra precautions and her and Riggs get more serious.
-On his retirement day, Roger tells his family, who start celebrating, that he has decided to remain with the force.