Corporate Bigwig Ed Dillinger created a chess program that gradually takes over his corporation. Calling itself the Master Control Program, it has become (like its creator) a greedy, self-aware program. In his meteoric rise to Senior Executive, Dillinger stole several programs for arcade games from the resident computer genius,
Programmer Kevin Flynn.
Flynn, now making a living owning gaming arcades, convinces his friends still employed at ENCOM, Alan Bradley and Lora Baines, to help him get into the office and hack the computer to find the evidence of the swindle.
His plan goes well at first. With help from Alan and Lora, he gets into the company, and starts poking around the computer system. But he has not counted on Dillinger's powerful artificial intelligence, the Master Control Program (MCP). The MCP instantly realizes what Flynn is up to. Rather than see his human patron ruined, the MCP uses an experimental laser to "digitize" Flynn, turning him into a computer file, and Flynn enters the electron stream that is the heart of the computer's thought processes.
All of the programs in the System appear to be humans, with the faces of their creators and glowing lines of power (blue for good, red for bad). SARK, a security program controlled by the MCP (and who looks like Dillinger) is tasked with eliminating Flynn. The MCP wants Flynn to be run through a series of game programs, where he will be "de-rez'd" (deleted) upon being defeated. Flynn, a pretty good video game player, survives his first challenge.
He is imprisoned with TRON, a monitoring program Alan Bradley wrote and the MCP is trying to destroy. Their next challenge on the game grid gives them an opportunity to escape, and after defeating their MCP-allied opponents, they flee on their electronic "light-cycles", escaping the game grid and entering the main computer system. TRON, Flynn, and RAM (an actuarial program), make their way to an Input/Output (I/O) Tower, so that TRON can communicate with Alan and receive the instructions for neutralizing the MCP.
During their adventures to the I/O Tower, RAM gets de-rez'd, and TRON and Flynn are separated.
Flynn realizes he is a "User"; as a human programmer, he has the abilities to affect change in the electronic world (versus programs who can only do what they are told). He is able to resurrect dying programs, rebuild broken vehicles, etc. Eventually, he decides to confront the MCP directly and heads toward the center of the system.
Meanwhile, TRON has hooked up with another program, YORI (written by Lora), who is part of the control system that carries information to different sections of the computer. YORI and TRON manage to make it to the I/O Tower, where the guardian DuMONT allows access and TRON receives the instructions from Alan. TRON and YORI escape (although DuMONT is captured by SARK). They escape in the Solar Sailer, meeting up with Flynn in the process.
SARK catches up with them, destroys the Sailer, and separates the trio yet again.
Tron continues to the MCP mesa; Flynn and YORI confront SARK, who attempts to de-rez them by dissolving his ship. Flynn, with his special abilities as a User, keeps Yori alive, reconstructs a moving skeleton of the ship, and continues to the MCP mesa.
In a climactic confrontation, Flynn and TRON assault the MCP and ultimately defeat it. At this point, the entire system comes alive, with the MCP's various security measures vanishing. Flynn is rematerialized, and TRON uncovers Dillinger's deceit. Dillinger is unseated from his high position, and Flynn takes his place.