Sam Bowden (Nick Nolte) is a lawyer living in North Carolina with his wife Leigh (Jessica Lange) and teenage daughter Danielle (Juliette Lewis). Max Cady (Robert De Niro), a former client whom Sam failed to defend properly, is released from prison after 14 years; Cady was tried for rape and battery of a young woman and, appalled by the attack, Sam buried evidence that might have lightened Cady’s sentence or even secured his acquittal.
Cady, who has studied law in prison but unsuccessfully appealed his conviction several times, tracks Sam down and begins to terrorise the Bowden family; he lurks near the property and the family dog is mysteriously killed. Sam attempts to have Cady arrested but the police say there is no evidence of a crime. At a bar, Cady intentionally meets Sam’s work colleague Lori. He later violently attacks and rapes her but she refuses to press charges, ashamed of what happened. Sam hires a private investigator, Kersek, to follow Cady.
Cady approaches Danielle at school by impersonating her new drama teacher, and they kiss. Sam warns Cady to leave him and his family alone or suffer the consequences, a conversation that Cady secretly tapes with a hidden recorder. Sam also hires three men to beat Cady; as Sam watches from afar, Cady turns the tide on his attackers and viciously beats them instead. Cady then uses the recording of Sam’s threat and an exaggerated display of his own injuries to file for a restraining order against Sam.
Kersek assumes that Cady may try to enter the Bowden house while he believes Sam is out of town; the family fakes his departure and hide in the house, hoping that Cady will break in so that he can be shot in self-defense. Cady kills the Bowden’s housekeeper Graciela and impersonates her to ambush and kill Kersek. Horrified after discovering the bodies, Sam, Leigh, and Danielle flee to their houseboat docked upstate along Cape Fear river.
Cady, who has followed the family, attacks Sam and prepares to rape Leigh and Danielle while making Sam watch. Danielle sprays Cady with lighter fluid as he lights a cigar, engulfing him in flames and causing him to jump off the boat. However, Cady clings to a rope and pulls himself back on board. As the boat is rocked by a violent thunderstorm, a badly burned and deranged Cady confronts Sam, putting him on a mock trial to condemn him for withholding the specific evidence that would have given him a lighter sentence in jail. Despite Sam’s insistence that his crime was too heinous for that evidence to be taken into account, Cady berates him for failing to properly do his duty as a lawyer.
The storm eventually knocks Cady off of his feet, allowing Sam to gain the upper hand once the women jump off the boat and make it to shore. Sam then uses Cady’s handcuffs to shackle Cady to the boat. When the boat hits a rock and is destroyed, the fight continues on shore, but a raging tide carries Cady away and he drowns. Sam washes the blood from his hands before he rejoins Leigh and Danielle.