In early 1950s Los Angeles, LAPD Sergeant “Ed” Exley is determined to live up the reputation of his father, famed detective Preston Exley, who was killed by an unknown assailant whom Exley nicknamed “Rollo Tomasi”. Already isolated from other officers by his intelligence, work ethic, and idealism, he volunteers to testify against them in the “Bloody Christmas” case in exchange for promotion to Detective Lieutenant. He rejects Captain Dudley Smith’s advice that a detective should beat a confession out of a suspect or shoot him in the back for the greater good.
Plainclothes Officer Wendell “Bud” White, whom Exley considers a “mindless thug”, is obsessed with viciously reprimanding woman-beaters. White confronts former cop Leland “Buzz” Meeks, a driver for Pierce Patchett, whose Fleur-de-Lis service runs prostitutes altered by plastic surgery to resemble film stars. White hates Exley due to his partner, Dick Stensland, being fired thanks to Exley’s testimony. With the city’s gangland kingpin Mickey Cohen imprisoned for tax evasion, Smith recruits White to torture out-of-town criminals trying to gain a foothold in Los Angeles.
Sgt. Jack Vincennes is a narcotics detective who moonlights as a technical advisor on Badge of Honor, a TV police drama series. Sid Hudgens, publisher of the Hush-Hush tabloid magazine, pays him for tips about celebrity arrests.
Exley investigates an apparent botched robbery and multiple homicide at the “Nite Owl” coffee shop. Stensland was one of the victims. Exley and Vincennes arrest three African-Americans for the murders; they later escape from police custody and are killed by Exley in a shootout. Exley is decorated for bravery.
Although the Nite Owl crime appears to have been solved, Exley and White individually investigate it to discover evidence of corruption all around them. White recognizes Nite Owl victim Susan Lefferts as one of Patchett’s escorts. He begins a relationship with Lynn Bracken, a Veronica Lake look-alike prostitute. Lefferts’ mother tells White that Susan was Stensland’s girlfriend; he searches the crawl space under her house and finds the decomposed corpse of Meeks.
Vincennes helps Hudgens to set up actor Matt Reynolds in a homosexual tryst with District Attorney Ellis Loew. After Reynolds is killed, a guilt-ridden Vincennes is determined to find the killer.
Vincennes soon visits Smith with the evidence he found: that Meeks and Stensland worked together under Smith’s command a decade earlier, and were linked to Patchett, who uses his prostitutes to blackmail public figures. As Vincennes explains that he has not yet told Exley about this, Smith suddenly shoots him – Vincennes dies after murmuring “Rollo Tomasi”, a name which Exley told him in confidence. Exley’s suspicions are aroused when Smith asks him who Rollo Tomasi is. During an interrogation of Hudgens, Smith arranges for White to see photos of Bracken having sex with Exley, which sends White into a rage and prompts him to go after Exley. Shortly afterwards, Smith kills Hudgens.
Exley discovers for himself that Meeks and Stensland used to work closely with Smith. White drives to the police station and fights Exley, which ends with the two realizing Smith is both corrupt and the mastermind behind everything; Stensland killed Meeks over heroin stolen from one of Cohen’s underlings, which triggered the events of Smith orchestrating the “Nite Owl” killings to have Stensland murdered and later framing the three African Americans behind the crime – with Exley and Vincennes having arrested them just after Smith’s men had planted evidence at their residence. They decide to cooperate to take down Smith. Exley and White confront Leow, and force him to reveal that Smith has been taking over Cohen’s heroin empire. They later find Patchett murdered, and deduced that all of the other killings have been Smith tying up loose ends.
Smith invites Exley and White into a trap. After they kill all of Smith’s gunmen in a shootout, Smith shoots White in the chest. Exley holds Smith at gunpoint and, as the police arrive, shoots him in the back – killing Smith. At the police station, Exley explains what he, Vincennes and White learned about Smith. The LAPD protect their image by saying Smith died a hero in the shootout, whilst awarding Exley a second medal for bravery. Upon leaving City Hall, Exley shakes hands with a recuperating White and watches as he and Bracken drive off to her home in Arizona.