In the near future, the city of Detroit is on the verge of bankruptcy after failing to pay off its debts to conglomerate Omni Consumer Products (OCP). In a scheme completely under their control, the company's Chairman intends to have the city default on its debt, then foreclose on all public property, effectively taking over its government and allowing for a radical urban redevelopment plan, gentrifying the old neighbourhoods into a utopian model community known as Delta City.
To rally public opinion behind the project, OCP sparks an increase in street crime by terminating the now-privatized Detroit Police Department's pension plans and cutting salaries, triggering a police strike. RoboCop, due to his directives, is unable to strike and remains on duty with his partner, Anne Lewis. The two raid a manufacturing plant of Nuke, a new, highly-addictive designer drug that has been plaguing the streets of Detroit. RoboCop and Lewis manage to kill or subdue most of the criminals, but the cartel's leader Cain and his adolescent accomplice Hob manage to escape, Hob managing to shoot and damage RoboCop due to his programming preventing the execution of minors.
Experiencing repeated flashbacks to his previous life as Alex Murphy, RoboCop has begun watching his wife and son outside their home. Still grieving over the death of her husband, his wife brings litigation against OCP, complaining of harassment. He is told by his handlers that he can never have his old life back, and to not bother her again. He tells her the same to spare her feelings effectively allowing his wife to move on, which she finds hard to do, knowing that what's left of her husband will never be the same again.
Meanwhile, OCP struggles to develop "RoboCop 2", which is expected to be mass-produced and completely replace both the striking police officers and the outdated ED-209. To their frustration, all the newly resurrected officers immediately malfunction and commit suicide, thus having damages cost up to $90 million. Dr. Juliette Faxx, an unscrupulous psychologist, concludes that Alex Murphy's strong sense of duty and his moral objection to suicide due to his Irish Catholic religion were the reasons behind his ability to adapt to his resurrection as RoboCop. Faxx convinces the Chairman to let her control the project, this time using a criminal with a desire for power and immortality. Despite his chief executive Donald Johnson's (Felton Perry) objection, Faxx is allowed to proceed.
Nuke kingpin Cain, a power-hungry gang leader with a messianic cult-of-personality, fears losing his grip in the wake of the Delta City project, and uses corrupt police officer and addict Duffy to undermine both OCP and RoboCop's enforcement efforts. RoboCop tracks down Duffy and beats the location of Cain's hideout out of him. He confronts Cain's gang at an abandoned construction site, but the raid is a trap and RoboCop is overwhelmed. The criminals cut apart his body and dump the pieces in front of his precinct. Cain has Duffy vivisected for revealing their location and forces Hob to watch.
RoboCop is repaired, but Faxx reprograms him with over 300 new directives at the insistence of the OCP Board of Directors, severely impeding his ability to perform his duties. One of his original technicians suggests that a massive electrical charge might reboot his system. RoboCop shocks himself with a high voltage transformer. The charge erases all of his directives, including the original ones, allowing his human brain (Murphy) to be in complete control. Murphy motivates the striking officers to aid him in raiding Cain's hideout. As Cain tries to escape, RoboCop intercepts and severely wounds him. Hob escapes and takes control of Cain's drug empire. Believing she can control him with Nuke, Faxx selects Cain for the RoboCop 2 project, and puts his brain in a towering and heavily armed body.
After failing to pay the city's debts via voluntary fundraising, the Mayor is contacted by and meets Hob, who offers to retire the city's entire debt to in exchange for a "hands off" policy towards Nuke, thereby nullifying OCP's scheme and preventing Delta City's construction. Threatened by this move, OCP sends RoboCop 2 to the meeting to kill Hob. Cain slaughters everyone in sight, except for the Mayor who manages to escape. RoboCop arrives to find a mortally wounded Hob, who identifies the attacker before dying.
During the unveiling ceremony for Delta City and RoboCop 2, the Chairman presents a canister of Nuke as a symbol of the current crime wave. Seeing Nuke, Cain breaks from his programming and goes berserk, attacking the crowd. RoboCop arrives and fights Cain. The two battle throughout the building, and the fight eventually extends to the street. The police force arrives and engages Cain, who opens fire at officers and civilians alike. RoboCop recovers the Nuke canister and has Lewis give it to Cain, who stops fighting to administer the drug to himself. As Cain feels the drug's effect, RoboCop leaps onto his back, shoots through his armor and rips out his brain. He crushes the brain, ending Cain's rampage.
The Chairman and Johnson decide to scapegoat Faxx to free OCP from blame, and leave. As Lewis complains that OCP is escaping accountability again, RoboCop insists they must be patient because "we're only human."