Walt Kowalski is a cantankerous, retired Polish American assembly line worker and Korean War veteran, who has recently been widowed after 50 years of marriage, causing him to be a lapsed Catholic. His home in Highland Park, a city in Wayne County, Michigan, which was formerly populated by working-class white families, is now dominated by poor Asian immigrants, and gang violence is commonplace. Adding to his isolation and detachment are his feelings towards his married sons and their families.
He rejects a suggestion from one of his sons to move to a retirement community (sensing that they want his home and possessions), and lives alone with his elderly dog, Daisy. A longtime cigarette smoker, Walt suffers from coughing fits, occasionally coughing up blood, but conceals this from his family. Catholic priest Father Janovich tries to comfort him, but Walt disdains the young, inexperienced man. Eventually, Walt opens up to the priest, revealing that he is still haunted by memories of the war.
The Hmong Vang Lor family reside next door to Walt. Initially, he wants nothing to do with his new neighbors, particularly after he catches Thao attempting to steal his 1972 Ford Gran Torino as a coerced initiation into a Hmong gang run by Thao’s cousin, Fong, whose nickname is “Spider”. The gang is infuriated by Thao’s failure and they attack him, but Walt confronts them with an M1 Garand rifle and chases them off, earning the respect of the Hmong community.
As penance, Thao’s mother makes him work for Walt for a week, who has him do odd jobs around the neighborhood, and the two form a grudging mutual respect. Thao is highly impressed at the extensive tool collection in Walt’s garage. Thao’s sister Sue introduces Walt to Hmong food and culture, and helps him bond with the Hmong community, who soon become more like family to Walt than his actual family; in turn, Walter becomes a better man to them than he was to his own sons. Walt helps Thao get a job working construction, and gives him advice on dating and how to make conversation at job interviews. Walt eventually visits a doctor regarding his coughing fits, where it becomes clear that he does not have long to live.
Thao faces continued abuse and harassment from Spider’s gang; they attack him on his way home from work, leading Walt to violently beat one of the gang members and hold him at gunpoint later. In retaliation, the gang fires at the Vang Lor house with submachine guns in a drive-by shooting, injuring Thao and damaging the house; a bloodied Sue appears at the door before collapsing, having been beaten and raped by the gang. An infuriated Walt learns from Father Janovich that Sue has been hospitalized. The neighbors decline to assist the following police investigation, fearing that providing information will trigger violent attacks from Spider’s gang.
The next day, Thao seeks Walt’s help to exact revenge, and Walt tells him to return later in the afternoon. In the meantime, Walt makes personal preparations: he buys a suit, gets a haircut, and makes a confession to Father Janovich, who had pressured him to make it at the behest of his late wife. When Thao returns, Walt takes him to the basement, gives him his Silver Star medal, then locks him in the basement and tells him of his haunting memory of having killed a surrendering enemy soldier. He keeps Thao locked in the basement, until the revenge is over, to make sure the boy will never be haunted by killing someone, with his life ahead of him.
That night, Walt goes to the gang members’ house, where they draw their firearms on him. He stands on the sidewalk in front of their house and loudly berates them and enumerates their crimes, drawing the attention of the neighbors. Putting a cigarette in his mouth, he asks for a light, then puts his hand in the pocket of his jacket and provocatively pulls it out as if he were holding a gun, causing the gang members to shoot him dead. As Walt falls to the ground, his hand opens to reveal the Zippo cigarette lighter with the 1st Cavalry insignia; he was unarmed. His plan from the beginning was to provoke them into killing him in public with the neighbors watching. Sue, following Walt’s directions, frees Thao and they drive to the scene in Walt’s Gran Torino. One of the police officers tells them that all of the gang members have been placed under arrest for the murder, and due to the number of witnesses, they face a lengthy sentence in prison; Thao and Sue realize that Walt intended to die to free the community of the gang’s terror.
Walt’s funeral mass is celebrated by Father Janovich and attended by his family and many of the Hmong community, many of whom are wearing traditional attire; their presence visibly puzzles Walt’s family. Afterwards, his last will and testament is read. To his family’s surprise, Walt leaves them nothing. His house goes to the church and his cherished Gran Torino goes to Thao, with the condition that he does not modify the vehicle. Later, Thao is seen driving the car along Jefferson Avenue with Daisy.