The story begins on November 20, 1988, when Guy Kazama, a soldier for the Special Mission Unit, is dispatched into the jungle to rescue hostages by the Lloyd government. However, the mission is soon discovered to be a trap, and Guy and his unit are ambushed by an attack helicopter. Guy is the sole survivor of the unit. The main antagonists of the game are the Force Project, an international arms band and terrorist organization led by four commanders. Colonel Jim Kadat of the Republic of Lybid, Mr. Tommy Lee of the Hong Kong mafia, Chairman Steve Lloyd of the Dual Foundation, and Dr. Che Garcia, a brilliant physicist.
Following the ambush, CIA director Harvey Leonard and President Allman hire Guy to eliminate the Force Project. Guy's first mission is to infiltrate Blue Rhinos and destroy stealth aircraft hidden in the base. Upon entering the base, he learns that his comrade Spartan has been taken hostage and rescues him. Spartan informs Guy that the stealth bombers are located at the back of the factory, and after destroying the aircraft, Guy and Spartan escape in a stealth bomber on the base's runway.
After the mission, the President's plane crashes on the eastern side of the Republic of Flett, and he is taken prisoner by a member of the Force Project, Major Dark. Leonard and his colleague Kay send Guy in to the camp at the top of Mount Alt to rescue the President. Along the way, Guy rescues several hostages, and defeats an imposter President as well as Dark himself.
Once the President has been rescued, Leonard sends Guy to find and assassinate Colonel Kadat, who has gone into hiding. His first task is to find and rescue Robert, a soldier who has been imprisoned. Guy learns that three bodyguards, Red, Blue, and Black, have information on Kadat and his whereabouts. After defeating the bodyguards, Guy locates and confronts Kadat, who wields an electric shock whip, and kills him.
Mr. Lee has a video conference with the remaining leaders of the Force Project, who inform him that Kadat has been killed. They also tell Lee that Guy is entering the martial arts tournament he holds every year to kill him, and have hired three of their toughest fighters to deal with Guy. Mr. Lee also asks Dr. Garcia about the completion of his ultimate weapon Indra, who estimates that it will be completed within a month. Guy then infiltrates the compound where the tournament is being held, and after defeating Mr. Lee's three fighters, confronts and kills Mr. Lee at the top of the tower before setting his sights on Steve.
Guy and Leonard's assistant Kay infiltrate a cruise ship where Steve is giving a speech at a party in celebration of the Dual Foundation. Guy tells Kay that the Steve giving the speech is actually a double while the real Steve is located somewhere on the ship. Guy also reveals that he has planted explosives on the ship to use as a diversion to find Steve. Fighting his way through the party and eventually reaching the ship's armory, Guy kills Steve and avenges his unit.
After Steve's death, Dr. Garcia informs the President that Indra needs only 24 hours to activate and destroy the world. He also challenges Guy, saying that he's the only one who can stop his plans. Guy arrives at a station on the moon where Indra is being constructed, and fights a resurrected Dark before confronting Dr. Garcia. Dr. Garcia escapes in a space shuttle to Indra and Guy gives chase. Inside Indra itself, Guy fights Dr. Garcia, who is revealed to be a cyborg, one final time. In his dying moments, Dr. Garcia tells Guy that the only way to stop Indra is to destroy it personally, but this will kill Guy in turn. Guy then battles the supercomputer controlling Indra and ultimately destroys it. Contrary to Garcia's claim, Guy falls to Earth in an escape capsule and informs Leonard and Kay to come pick him up.
