The film is set in the near future of a bleak, dystopian and impoverished Australia that is facing a breakdown of civil order primarily due to widespread oil shortages. (This is not explained in this film but in the sequel, Mad Max 2: The Road Warrior.) Central to the plot is a poorly-funded national police unit called the Main Force Patrol (MFP), which struggles to protect the Outback's few remaining townspeople from violent motorcycle gangs. The MFP's "top pursuit man" is a young police officer, Max Rockatansky (Mel Gibson), badge number MFP4073.
A member of one of the motorcycle gangs, Crawford Montazano (nicknamed Nightrider), escapes from police custody by killing an officer and stealing his vehicle. Max pursues Nightrider in a high-speed chase, which results in Nightrider's death in a fiery car crash. After the dangerous chase (which results in injuries to a number of officers), the police chief warns Max that Nightrider's gang will be out for him now because of Nightrider's death.
Nightrider's gang, which is led by Toecutter (Hugh Keays-Byrne), plans to avenge Nightrider's death by killing MFP officers. Meanwhile, they vandalize property, steal fuel, and terrorize the citizenry. The gang brutalizes a civilian couple that tried escaping to the road after seeing them run roughshod through their town; the couple is overtaken, then both of them are raped and the car is wrecked. Max and his close friend and fellow officer, Jim Goose (Steve Bisley), are informed about the incident and go to the crime scene. They find Toecutter's young protegé, Johnny the Boy (Tim Burns), and the girl of the couple in the middle of the wreckage. Johnny's drug-fueled rantings reveal him as a member of Nightrider's gang; Goose looks on Johnny with particular disdain, as his leg was broken during the Nightrider pursuit. However, they do not kill Johnny, but arrest him and drag him away in chains.
Johnny is held at the MFP's dilapidated Halls of Justice pending a visit from the Court. However, when the attorneys arrive, Johnny is ordered released: the judge has set Johnny free because no witnesses showed up for the trial. (Without the testimony of witnesses, no charges could be filed; the courts declared "no contest" for the case.) A shocked Goose attacks Johnny and must be physically restrained; both Goose and Johnny shout threats of revenge at each other. The second-in-command of the biker group, Bubba Zanetti (Geoff Parry) arrives at the courthouse to pick up Johnny, on orders from the Toecutter. Bubba does so begrudgingly, because he hates Johnny for his rowdiness and lack of style, and hates the Toecutter's favoritism towards Johnny.
Shortly thereafter, Johnny the Boy sabotages Goose's MFP motorcycle while Goose is attending a show at the Sugartown Cabaret. The motorcycle locks up at high speed the next day, throwing Goose from the bike; Goose, however, survives without even suffering "road rash". Goose borrows a ute to haul his bike back to civilization. Unfortunately, Johnny throws a brake drum through the ute's windshield, causing Goose to roll the vehicle over; Johnny then burns him alive in the wreckage. Goose survives, but after seeing his charred body in the hospital's burn ward, Max becomes angry and disillusioned with the police force and resigns from the MFP with no intention of returning. He takes a road trip with his wife and infant son in the relatively peaceful coastal area north of their home.
While on holiday, Max's wife, Jessie, (played by Joanne Samuel) runs into Toecutter's gang, who attempt to molest her. She escapes, but the gang manages to track her to the home where she and Max are staying. While attempting to escape from the gang again, Jessie and her son are run down by the gang, who leave their crushed bodies in the middle of the road. Max arrives too late to intervene. His son is pronounced dead on the scene, while his wife suffers massive injuries. (It is revealed in Mad Max 2: The Road Warrior that she later died from her injuries.)
Filled with obsessive rage, Max once again dons his police outfit, straps on his sawn-off shotgun, and steals a supercharged black Pursuit Special to pursue the gang. He methodically hunts down and kills the gang members: several gang members are forced off a bridge at high speed; Max shoots and kills Bubba at point blank range with his shotgun (Bubba shoots Max in the leg with a pistol first, though, giving Max a limp that is consistent throughout the series); the Toecutter is forced into the path of a speeding tractor trailer and crushed. When Max finds Johnny the Boy taking the boots off a dead driver at the scene of a crash, he handcuffs Johnny's ankle to the wrecked, overturned vehicle with a ruptured petrol tank. Max lights a crude time-delay fuse and gives Johnny a hacksaw, leaving him the choice of sawing through either the handcuffs (which will take 10 minutes) or his ankle (which will take 5 minutes), and then drives off into the desolate outback. As Max drives away, the camera shows Max's car from the front, with a large and fiery explosion in the distance behind it.
