On Christmas Eve, New York City Police Department (NYPD) Detective John McClane arrives in Los Angeles, hoping to reconcile with his estranged wife, Holly, at a party held by her employer, the Nakatomi Corporation. He is driven to Nakatomi Plaza by a limo driver, Argyle, who offers to wait for McClane in the garage. While McClane washes himself, the tower is seized by the German radical Hans Gruber and his heavily armed team, including Karl and Theo. Everyone in the tower is taken hostage except for McClane, who slips away, and Argyle, who remains oblivious to events.

Gruber is posing as a terrorist to steal the $640 million in untraceable bearer bonds in the building's vault. He kills executive Joseph Takagi after failing to extract the access code from him and tasks Theo with breaking into the vault. The terrorists are alerted to McClane's presence, and Karl's brother, Tony, is sent after him. McClane kills Tony and takes his weapon and radio, which he uses to contact the skeptical Los Angeles Police Department (LAPD). Sergeant Al Powell is sent to investigate. Meanwhile, McClane kills more terrorists and recovers their bag of C-4 and detonators. Realizing Powell is about to leave, having found nothing amiss, McClane drops a terrorist's corpse onto his car. After Powell calls for backup, a SWAT team attempts to storm the building but is counterattacked by the terrorists. McClane throws some C-4 down an elevator shaft, causing an explosion that kills some of the terrorists and ends the counterattack.

Holly's co-worker Harry Ellis attempts to negotiate on Gruber's behalf but is killed by Gruber when McClane refuses to surrender. While checking the explosives on the roof, Gruber encounters McClane and pretends to be an escaped hostage; McClane gives Gruber a gun. Gruber attempts to shoot McClane but finds the weapon is unloaded, and he is saved only by the intervention of other terrorists. McClane escapes but is injured by shattered glass and loses the detonators. Outside, Federal Bureau of Investigation (FBI) agents take control. They order the power to be shut off, which, as Gruber had anticipated, disables the final vault lock so his team can collect the bonds.

The FBI agrees to Gruber's demand for a helicopter, intending to send helicopter gunships to eliminate the group. McClane realizes Gruber plans to blow the roof to kill the hostages and fake his team's deaths. Karl, enraged by Tony's death, attacks McClane and is seemingly killed. Gruber sees a news report by Richard Thornburg on McClane's children and deduces that he is Holly's husband. The hostages are taken to the roof while Gruber keeps Holly with him. McClane drives the hostages from the roof just before Gruber detonates it and destroys the approaching FBI helicopters. Meanwhile, Theo retrieves an escape vehicle from the parking garage but is knocked out by Argyle, who has been following events on the limo's CB radio.

A weary and battered McClane finds Holly with Gruber and his remaining henchman. McClane surrenders to Gruber and is about to be shot but grabs his concealed service pistol taped to his back and uses his last two bullets to wound Gruber and kill his accomplice. Gruber crashes through a window but grabs onto Holly's wristwatch and makes a last-ditch attempt to kill the pair. McClane unclasps the watch, and Gruber falls to his death. Outside, Karl ambushes McClane and Holly but is shot dead by Powell. Holly punches Thornburg when he attempts to interview McClane. Argyle crashes through the parking garage door in the limo and drives McClane and Holly away together.