Captain Dmitri “Demi” Zubov (Harris) is a veteran Soviet Navy captain finishing up a career that failed to live up to the legacy of his legendary father. He is given an assignment by Markov (Henriksen) to lead a top secret mission and given the command of his old ship. Due to mistakes he made during his service, involving the deaths of six of his past crew in a collision and fire, this will be his last assignment and his only opportunity to command any ship at all. Demi interrupts a party involving his crew, including Alex Kozlov (Fichtner), his up-and-coming executive officer headed for great success. However, as Demi leaves his home to lead Alex and his crew on the secret mission, the presence of a KGB contingent led by agent Bruni (Duchovny), and ominous portents, begin to alter the objectives of the mission, causing Demi and Kozlov to become concerned. Furthermore, Markov commits suicide at his office window while watching the submarine depart.
Demi and Kozlov are wary of Bruni and his men and soon discover his mission: to use a device known as the Phantom to alter their ship’s acoustic signature to make them appear to be a civilian merchant vessel, or a number of other ships. After a demonstration, Demi questions Bruni about the device and the mission’s objectives. Soon after, Bruni’s men hold Demi at gunpoint. Bruni eventually reveals to Demi that he and his comrades are rogue operatives and not here under orders from the Soviet government. He explains that the United States military has started a secret program called “Dark Star” that will make the United States invulnerable to the Soviet Union’s nuclear weapons, and he and his fellow operatives fear for the safety of their homeland if its nuclear capabilities are rendered useless. Their plan is to start a nuclear war between the United States and China by disguising the ship as a Chinese vessel and launching a nuclear missile at the American Pacific Fleet off Midway. After Demi refuses to cooperate, he and those loyal to him are taken and locked away in the ship, where Demi explains his past failures and explains how he began to suffer from seizures and brain trauma after suffering a concussion from his sub’s fateful collision with Markov’s sub.
Demi, Kozlov and the loyal crew plot and execute a plan that eventually takes back the ship and alerts another Russian submarine that they are in distress. Two other members of the crew, Tyrtov (Flanery) and Sasha (Gray-Stanford), attempt to disable the missile. They succeeded in disabling the warhead, even though the missile was fired. Eventually, fighting ensues onboard, resulting in the deaths of many of both Demi’s crew and Bruni’s men. The submarine is soon badly damaged by Soviet torpedoes and sinks to the ocean floor. The crew begin breathing in poisonous chlorine gas fumes produced by the mixture of seawater and battery acid, as Alex is sent on a rescue attempt for the remaining crew. Bruni explains to Demi that he was on board when the fire took place and that he was the man ordered by Demi to trap the men, leading to their demise.
Eventually, the submarine is recovered and the remaining crew, including Demi and his men, are seen standing atop the ship. From the nearby dock, Demi’s wife and daughter praise his actions while Alex, now a captain, salutes the sub, paying respects to his former commanding officer. It is then revealed that Demi and his men, watching from the submarine’s deck, are ghosts, watching from the afterlife.