Ellen Ripley has been in stasis in a shuttle for 57 years. She is rescued and debriefed by her employers at the Weyland-Yutani Corporation; they are skeptical of her claims that an alien creature killed her entire crew and forced her to destroy her ship the Nostromo, and they subsequently revoke her flight officer license.
The exomoon LV-426, where the Nostromo initially encountered the derelict ship containing alien eggs, is now home to the terraforming colony Hadleys Hope. When contact is lost with the colony, Weyland-Yutani representative Carter Burke and Colonial Marine Lieutenant Gorman ask Ripley to accompany Burke and a Colonial Marine unit to investigate the disturbance. Despite suffering from recurring nightmares about her original experience with the alien, she eventually joins the expedition on Burke's word that their mission is to exterminate the creatures. Aboard the spaceship USS Sulaco, she is introduced to the Colonial Marines and the android Bishop, toward whom Ripley is initially hostile following her experience with the traitorous android Ash aboard the Nostromo.
A dropship delivers the expedition to the surface of LV-426, where they find the colony deserted. Inside, they find makeshift barricades and signs of a struggle, but no bodies; two live facehuggers in containment tanks in the medical lab; and a traumatized young girl nicknamed Newt, the Sole Survivor, who used the extensive ventilation system to evade the aliens. The crew uses the colony's computer to locate the colonists grouped beneath the fusion powered atmosphere processing station. They head to the location, descending into corridors covered in alien secretions.
At the center of the station, the Marines find the colonists cocooned, serving as incubators for the creatures' offspring. When the Marines kill a chestburster, the other aliens are roused and ambush the troops, killing Frost, Crowe and Wierzbowski while capturing Apone and Dietrich alive to be cocooned as hosts. When the inexperienced Gorman panics, Ripley assumes command, taking control of their armored personnel carrier, and rams the nest to rescue Corporal Hicks, and Privates Hudson, Drake and Vasquez. Drake is subsequently killed while laying down covering fire as the APC is loaded, and Hicks orders the dropship to recover the survivors, but a stowaway alien kills the pilots Spunkmeyer and Ferro, causing it to crash into the station. The remaining group barricade themselves inside the colony command center.
Ripley discovers that Burke sent the colonists to investigate the derelict spaceship where the Nostromo crew first encountered the eggs, believing he could become wealthy by recovering alien specimens for use as biological weapons. She threatens to expose him, but Bishop informs the group that the power plant was damaged by the dropship crash along with the previous firefight that ruptured the cooling system and will soon explode with the force of a 40-megaton thermonuclear weapon. He volunteers to crawl through several hundred meters of piping conduits to reach the colony's transmitter and remotely pilot the Sulaco's remaining dropship to the surface.
Ripley and Newt fall asleep in the medical laboratory, awakening to find themselves locked in the room with the two facehuggers, which have been released from their tanks. Ripley triggers a fire alarm to alert the Marines, who rescue them and kill the creatures. Ripley accuses Burke of releasing the facehuggers so that they would impregnate her and Newt, allowing him to smuggle the embryos past Earth's quarantine, and of planning to kill the rest of the Marines so that no one could contradict his version of events. Before the Marines can kill Burke, the power is cut, and aliens assault through the ceiling. In the ensuing firefight, Burke attempts to flee but is cornered by an alien and he is killed, while Hudson is dragged away after covering the others' retreat. Gorman and the injured Vasquez detonate a grenade and sacrifice themselves; Hicks is injured, and Newt is captured.
Ripley and Hicks reach Bishop in the second dropship, but Ripley refuses to abandon Newt. The group travels to the processing station, allowing a heavily armed Ripley to enter the hive and rescue Newt. As they escape, the two encounter the alien queen in her egg chamber. When an egg begins to open, Ripley uses her flamethrower to destroy the eggs and the queen's ovipositor. Pursued by the enraged queen, Ripley and Newt reunite with Bishop and Hicks on the dropship. All four escape moments before the station explodes with the colony consumed by the nuclear blast.
On the Sulaco, the group is ambushed by the queen, who stowed away in the ship's landing gear. The queen tears Bishop in half and advances on Newt, but Ripley battles the creature using an exosuit cargo-loader and expels it through an airlock into space. Ripley, Newt, Hicks, and the critically damaged Bishop enter hypersleep for their return trip to Earth.