As New Year begins in London, international terrorist Wulfgar (Rutger Hauer) blows up a department store, killing dozens. Immediately afterwards, he calls the media and boasts of his victory and explains that 'there is no security'. Later that night, his contact leads the police to his doorstep where he shoots them all and escapes. However, Wulfgar's passport falls into Interpol's hands and with the net tightening, he flees to America and undergoes plastic surgery.
Meanwhile, in New York, cops Deke DeSilva (Sylvester Stallone) and Matthew Fox (Billy Dee Williams) are pulled from their regular duty on the decoy squad and ordered to assist the manhunt. Having doggedly pursued Wulfgar across the Atlantic, Interpol agent Hartman (Nigel Davenport) tries to give DeSilva and Fox a crash course in anti-terrorist tactics. But the 'shoot-to-kill' policy that Hartman encourages doesn't go down well with DeSilva who didn't join the force to kill anyone. Hartman also makes a personal attack regarding Deke's ex-wife Irene (Lindsay Wagner) which causes him to leave.
Using New York's bars and clubs, Wulfgar meets a woman and uses her for safe-housing his equipment. Then, Wulfgar announces his presence in New York by destroying several Wall Street buildings. A reluctant DeSilva is persuaded by Fox to stay on the investigation, just as a break arrives in the case. The young women is found dead and the two cops decide to check out the bars that she frequented.
Finally, using a drawing that Deke sketched from Wulfgar's original photograph, the pair corner Wulfgar and chase him out into the streets. Following a lengthy pursuit in the subway, Wulfgar slashes Fox's face with a knife and manages to slip away. Fox survives the attack, but DeSilva is determined not to let Wulfgar escape again.
Hartman concludes that an upcoming gathering of international politicians would be Wulfgar's next target. Himself, DeSilva and others put on a show of tight security at the Embassy. But instead of Wulfgar, it is his associate Shakka Holland (Persis Khambatta) who infiltrates the building and shoots Hartman in cold blood, killing him.
Shortly afterwards, a Roosevelt Island cable car containing foreign dignitaries is hijacked by Wulfgar and Shakka. DeSilva and Wulfgar finally get chance to meet face-to-face during the standoff, but Wulfgar only wants to pass on a message to press and spares his enemy for the time being.
With his demands met and the press in an uproar, Wulfgar and Shakka lower the tram where a bus awaits. Fox is unable to get a clear shot on either one of them, until Deke plays a hidden tape recording. It is of Hartman's analysis on Shakka and provokes a reaction from her, giving Fox the opportunity to take her out with his rifle. Wulfgar boards the bus and drives into the river, his body nowhere to be seen.
Later that night, Fox and DeSilva search Wulfgar's last safehouse and discover files on the pair of them. One particular document causes Deke to rush to the phone, but when there's no answer, he leaves the safehouse.
Irene, Deke's estranged wife, is watched by Wulfgar as she walks home. After she goes inside, he follows her and quietly breaks the door chain. Wulfgar moves silently and slowly through the house, taking the phone off the hook and drawing his knife. Irene has her back to him, washing some dishes in the sink. Just as he sneaks up on her, however, the figure turns around and it is none other than Deke DeSilva in a disguise. Using his own decoy tactics employed earlier, Deke draws his gun and shoots the man dead. Wulfgar is sent falling out the front door and down the steps, where DeSilva sits in silence.
