This crime drama sparks of where the first film left off, at a funeral held by the Hong Kong Police Force for two superintendents killed during the previous film. Shortly after, the commissioner Sean Lau (Aaron Kwok) receives a call from one of the culprits behind the theft of the police van.
He is told that his wife has been kidnapped and that he must release Joe Lee (Eddie Peng) for her to survive. Lau overrides standard procedure to transfer Joe out of prison, and is told by the kidnapper to bring Joe to the metro station. There, Joe is able to escape with the aid of several accomplices, one of whom sets off a bomb. The culprits leave Lau's wife alive at the station.
Lau's actions are criticized by the media and by numerous politicians, leading to a public inquiry. Fearing that the police have been infiltrated, Lau privately requests Billy Cheung (Aarif Rahman), an ICAC agent, to form a separate squad independent of the police, so they can track down the culprits. Meanwhile, MB Lee (Tony Leung), a deputy police commissioner who is about to retire, who is also the father of Joe, is confronted by his fugitive son along with Peter Choi (Chang Kuo-chu), a former commissioner who is now manipulating politics behind the scenes.
Choi is revealed as the mastermind behind the troubles of the previous film, and his current goal is to remove Lau, who is not a member of his ring, and to place his own followers into positions of power during the next election. Choi has formed a militant band consisting of former police officers who were expelled or faked their own deaths. He promises Lee not only the position of commissioner, but also of security secretary later on, upon which Lee gives into temptation.
A legislator named Oswald Kan (Chow Yun-fat) is convinced by his old friend Lai (Waise Lee), the secretary of justice, to participate in the public inquiry into Lau, but is taken aback when Lee openly criticizes Lau, rather than defending him. Kan deduces that Lee is being controlled, and tells his pupils to investigate, one of whom, Bella Au (Janice Man), decides to secretly follow Lee, and later Choi whom Lee confers with.
Realizing that they are being followed, Choi orders a subordinate to crash into Au's car, causing a chain collision in which Au is killed, and Choi's car is trapped. Lau arrives to investigate, and a shoot-out occurs, in which Joe is shot and severely injured by Lau, but Choi escapes. Kan finds a photograph taken by Au of Choi and Lee together.
Lau's independent squad finds the location of Choi's remaining henchmen and the stolen police van. Lee, meanwhile, convinces or bribes several senior police officers to sign a petition for Lau's removal. In the final hours before Lau steps down, he launches a raid on the henchmen, and requests that Lee take command, noting that, since the henchmen are renegade police officers formerly under Lee, Lee would best know their strategies. Lee accepts, knowing that he cannot refuse without looking weak, but since he is secretly close friends with those henchmen, killing them taxes him emotionally.
The operation is a success, with all suspects killed, and Kan and Lau report Lee's and Choi's crimes to the chief executive, who decides to grant amnesty to Lee and Choi, since they are too important to arrest without destabilizing society. Lee is forced into retirement, and Choi is permanently exiled from Hong Kong, but otherwise, their exact crimes are never disclosed to the public. Lau retains his office as commissioner, and Lee visits his son, who is in custody, and lying in a bed at the hospital.
