Seeking revenge against James Bond (Agent 007) for the death of their agent Dr No in Jamaica, international criminal organisation SPECTRE begins training agents to kill him. Irish assassin Donald "Red" Grant proves himself by quickly killing a Bond impostor with a garrote concealed in his wristwatch.
SPECTRE's chief planner, Czech chess grandmaster Kronsteen (Number 5), devises a plan to play British and Soviet intelligence against each other to procure a Lektor cryptography device from the Soviets and lure Bond to his assassination. SPECTRE's chief executive (Number 1) puts Rosa Klebb (Number 3), a former SMERSH (Soviet counter-intelligence) colonel, in charge of the mission. Klebb chooses Grant to protect Bond until he acquires the Lektor, then eliminate 007 and steal the machine for SPECTRE. Klebb also recruits Tatiana Romanova, a cipher clerk at the Soviet consulate in Istanbul, who believes Klebb is still working for SMERSH.
In London, M informs Bond that Romanova has contacted "Station T" in Turkey, offering to defect with a top-secret Lektor on the condition that Bond handle her case personally. M decides the chance of obtaining a Lektor is worth the risk, and Q gives Bond an attaché case with concealed throwing knife, gold sovereigns, a tear gas booby trap, and an ArmaLite AR-7 sniper rifle.
In Istanbul, Bond meets station head Ali Kerim Bey, tailed by Bulgarian agents working for Russia, who are themselves tailed by Grant; he kills one agent and dumps their car outside the Soviet Consulate. The Soviets bomb Kerim's office with a limpet mine, but he is away from his desk with his mistress. He and Bond spy on a Soviet consulate meeting through a periscope in the aqueducts beneath Istanbul, and learn that Soviet agent Krilencu is responsible for the bombing. Kerim and Bond lay low at a rural gypsy settlement, where Krilencu attacks them with a band of Bulgarians; Bond is saved by a sniper shot from Grant. Bond and Kerim track down Krilencu, and Kerim kills him with Bond's rifle.
Bond finds Romanova in his hotel suite and they have sex, neither aware SPECTRE is filming them. Romanova brings the consulate floor plans to the Hagia Sophia, and Grant kills the other Bulgarian to ensure Bond receives them. Using the plans, Bond and Kerim steal the Lektor and escape with Romanova aboard the Orient Express. Kerim and Bond subdue a Soviet security officer named Benz tailing them. Grant kills Kerim and Benz, preventing Bond from rendezvousing with one of Kerim's men.
At the Belgrade station, Bond passes word of Kerim Bey's death to his son, and asks for an agent from Station Y to meet him at Zagreb. Grant kills Nash, sent from Station Y, and poses as the agent. After drugging Romanova at dinner, Grant overpowers Bond, taunting him that Romanova believed she was working for Mother Russia, and reveals his plan to leave the compromising film of Bond and Romanova with a blackmail letter, staging their deaths as a murder-suicide to scandalise the British intelligence community. Bond tricks Grant into setting off the booby trap in his attaché case and stabs him with the concealed knife before strangling him with his own garrotte, and flees with Romanova in Grant's getaway truck.
Number 1 confronts Klebb and Kronsteen for their failure. Kronsteen is executed by the henchman Morzeny’s poison-tipped switchblade in his shoe, while Klebb is given one last chance to acquire the Lektor, which they have arranged to sell back to the Russians.
Following Grant's escape route, Bond destroys a SPECTRE helicopter, and he and Romanova steal Grant's boat on the Dalmatian coast. Pursued by Morzeny's squadron of SPECTRE powerboats, Bond detonates his own powerboat's fuel drums with a flare gun, engulfing the pursuers in a sea of flames.
He and Romanova reach a hotel in Venice, where they are attacked by Klebb, disguised as a maid. She tries to kick Bond with a poisoned switchblade shoe, but Romanova shoots her. Their mission accomplished, Bond and Romanova depart on a romantic boat ride, and Bond throws Grant's blackmail film into the canal.