Seeking to exact revenge on James Bond (007) for killing its agent Dr. No and destroying the organisation's assets in the Caribbean, the international criminal organisation SPECTRE begins training agents to kill Bond. Their star pupil is Donald "Red" Grant, an Irish assassin who proves his mettle by killing a Bond impostor in one minute and fifty-two seconds on a training course with a garrote wire concealed in his wristwatch.
Meanwhile, the organisation's Chief Planner, a Czech chess grandmaster named Kronsteen (Number 5), devises a plan to play British and Soviet intelligence against each other to procure a Lektor cryptographic device from the Soviets. SPECTRE's Chief Executive, Number 1, puts Rosa Klebb (Number 3), a former Colonel of SMERSH (the counter-intelligence branch of Soviet Intelligence) who has defected to SPECTRE in the West, in charge of the mission as Chief of Operations. Klebb chooses Grant to protect Bond until he acquires the Lektor and then to eliminate 007 and steal the cipher machine for SPECTRE. As part of the scheme, Klebb recruits the beautiful Tatiana Romanova, a cipher clerk at the Soviet consulate in Istanbul, who believes the ex-Colonel still to be working for SMERSH.
In London, M informs Bond that Romanova has contacted their "Station 'T'" in Turkey, claiming to have fallen in love with Bond from his file photo. She offers to defect to the West, and will bring a top secret Lektor with her to sweeten the deal but only on the condition that Bond handle her case, personally. Prior to his departure, Bond is supplied by Q with an attaché case containing a concealed throwing knife, gold sovereigns, a special tear gas booby trap connected to the lock mechanism and ammunition for an Armalite AR-7 folding sniper rifle with an infrared night scope.
After travelling to Istanbul, Bond heads into the city to meet with station head Ali Kerim Bey, tailed by Bulgarian secret agents working for the Russians. They are in turn tailed by Grant, who kills one of them after Bond is taken back to his hotel, stealing their car and dumping it outside the Soviet Consulate in order to provoke hostilities between British and Soviet Intelligence. In response, the Soviets bomb Kerim's office with a limpet mine; Kerim, however, is away from his desk for a tryst with his mistress. He and Bond then investigate the attack by spying on a Soviet consulate meeting through a periscope installed in the underground aqueducts beneath Istanbul. Thus, they learn that the Soviet agent Krilenku is responsible for the bombing. Kerim Bey declares it unwise to stay in the city under such circumstances and takes Bond to a rural gypsy settlement. However, Krilenku learns of this and promptly attacks a Gypsy feast, where Bond and Kerim are honoured guests, with a band of hired Bulgarian fighters. Much to Bond's confusion, he is saved from an enemy fighter during the attack by a distant sniper shot from Grant. The following night, Bond and Kerim Bey track Krilenku down to his hideout, where Kerim Bey kills him with Bond's rifle.
Upon returning to his hotel suite that night, Bond finds Romanova waiting for him in his bed and has sex with her; neither is aware that SPECTRE is filming them. The next day, Romanova heads off for a prearranged rendezvous at Hagia Sophia to drop off the floor plans for the consulate, with Grant ensuring Bond receives the plans by killing the other Bulgarian tail who attempts to intercept the drop. Using the plans, Bond and Kerim Bey successfully steal the Lektor and, together with Romanova, escape with the device onto the Orient Express. On the train, Kerim Bey quickly notices a Soviet security officer named Benz tailing them, prompting him and Bond to subdue him. When Bond leaves Benz and Kerim Bey alone together, Grant kills them and makes it appear as though they killed each other, preventing Bond from leaving the train with Romanova to rendezvous with one of Kerim's men.
At the railway station in Belgrade, Bond passes on word of Kerim Bey's death to one of his sons, and asks for an agent from Station Y to meet him at Zagreb. However, when the train arrives at the station, Grant intercepts Nash, sent from Station Y, killing the agent before posing as him. After drugging Romanova at dinner, Grant overpowers Bond before taunting him about SPECTRE's involvement in the theft. After disclosing that Romanova was unaware of what was truly going on, believing she was working for Russia, Grant reveals to Bond his plans to leave behind the film SPECTRE took of him and Romanova at the hotel, along with a forged blackmail letter, to make it appear that their deaths were the result of a murder-suicide, to scandalise the British . Bond quickly convinces him to accept a bribe of gold sovereigns in exchange for a final cigarette, tricking Grant into setting off the booby trap in his attaché case. This distracts Grant enough for Bond to attack him in a brutal brawl. In the ensuing fight, Bond narrowly gains the upper hand, stabbing Grant with the case's concealed knife before strangling him with his own garrotte. Bond then drags the barely conscious Romanova from the train, which has been stopped by a SPECTRE accomplice, where he hijacks Grant's getaway truck and flees the scene with Romanova.
Upon hearing the news of Grant's death, Number 1 calls Klebb and Kronsteen onto the carpet to explain what went wrong and remind them that SPECTRE does not tolerate failure. Kronsteen is executed by the henchman Morzeny with a kick from the poison-tipped switchblade in his shoe. Klebb, however, is given one last chance to make good on the mission and acquire the Lektor (which has already been promised to the Russians in a sell-back scheme).
The next morning, Bond's stolen truck is intercepted along its escape route by a SPECTRE helicopter, but 007 destroys the attacking aircraft by shooting its co-pilot with his sniper rifle, causing the man to drop a live hand grenade in the cockpit. Thus, Bond and Romanova make it to Grant's escape boat on the Dalmatian coast and steal that, too, only to be pursued by Morzeny, who leads a squadron of SPECTRE powerboats. Bond, however, escapes by dumping his own powerboat's fuel drums overboard and detonating them with a Very flare to engulf all the chase boats in a sea of flames.
Eventually, he and Romanova reach a hotel in Venice, where they believe themselves to be safe. Klebb, however, disguised as a maid, makes one final attempt on Bond and the Lektor. Klebb tries to kick him with a poisoned switchblade shoe, but Romanova shoots her with her own dropped gun. With the mission accomplished, Bond and Romanova leave Venice on a romantic boat ride, in which course Bond throws Grant's blackmail film into the canal.