Paul Kersey (Charles Bronson) has come back to Brooklyn after being banned since the events of the first film to visit his Korean War buddy Charley, who is attacked by a gang in his apartment. The neighbors hear commotion and call the police. Paul arrives as Charley collapses dead in his arms. The police mistakenly arrest Paul for the murder. At the police station, Lieutenant Richard Shriker (Ed Lauter) recognizes Paul as "Mr. Vigilante". Shriker lays down the law before Paul is taken to a holding cell. In the same cell is Manny Fraker (Gavan O'Herlihy), leader of the gang who attacked and killed Charley. He and Paul fight. When he is released, Manny threatens Paul. Manny arrives on his “gang turf” and slashes fellow gang member Hector (David Crean), possibly for betrayal. The police receive daily reports about the increased rate of crime. Shriker offers a deal to Paul—to kill all the punks he wants, as long as he informs Shriker of any gang activity he hears about so the police can get a bust and make news.
Paul moves into Charley's apartment in a gang-turf war zone. The building is populated by elderly tenants terrified of Manny's gang. They include Bennett Cross (Martin Balsam), a World War II veteran and Charley’s good buddy, plus Mr. and Mrs. Kaprov, an elderly Jewish couple, and a young Hispanic couple, Rodriguez (Joseph Gonzalez) and his wife Maria (Marina Sirtis). After a few violent muggings, Kersey goes into action. He buys a used car as bait. When two gang members try to break into the car, Kersey shoots them with a .38 Colt Cobra revolver. Kersey twice protects Maria from the gang, but is unable to save her a third time. She is assaulted and raped, later dying in hospital from her injuries.
Kersey orders a new gun, a .475 Wildey Magnum. He spends the afternoon with Bennett handloading ammunition for it. He then tests the gun when The Giggler (Kirk Taylor) steals his camera. Paul is applauded by the neighborhood as Shriker and the police take the credit. Kersey also throws a gang member off a roof. A possible love interest develops with public defender Kathryn Davis (Deborah Raffin). She is moving out of the city and Kersey offers to take her to dinner. While waiting in his car, Kathryn is knocked unconscious by Manny and the car is pushed into oncoming traffic. It slams into another car and explodes, killing Kathryn. (After a slight variation in Death Wish II, this re-establishes the murder of Kersey's love interest by gang members as a firm series tradition).
Shriker places Kersey under protective custody, fearing he is in too deep. Bennett takes matters into his hands with a German MG-42. After his taxi shop is blown up, he tries to get even but his gun jams. The gang cripples Bennett. Kersey is taken by Shriker to the hospital, where he escapes after Bennett tells him where to find a .30 Browning M1919 machine gun. Kersey and Rodriguez collect weapons. They proceed to mow down many of the criminals before running out of ammo. Other neighbors begin fighting back as Manny sends in more reinforcements.
Shriker decides to help and he and Kersey take down much of the gang together. Kersey goes back to the apartment to collect more ammo, but Manny finds him there. Shriker arrives just in time and shoots Manny, who falls to the floor, apparently dead. Shriker is wounded in the arm (but his life is saved by a bulletproof vest). As Kersey calls for an ambulance, Manny rises (he was also wearing a bulletproof vest) and turns his gun on the two men. As Shriker distracts him, Kersey uses a mail-ordered M72 LAW rocket launcher to obliterate Manny. As Manny's girlfriend screams in horror, what remains of the gang rush to the scene and see Manny's smoldering remains. One of the other gang members attempts to retaliate, but Manny's girlfriend stops him. Surrounded by the angry crowds of neighbors ready to fight back even more, the gang realizes they've lost and flee the scene. As the neighbors cheer in celebration and with police sirens in the distance, Shriker gives Kersey a head start. Kersey gives a look of appreciation and takes off.