In the distant future, an artificial intelligence known as "Skynet" commandeered control over the United States's nuclear weapons, causing a devastating war known as "Judgment Day" that brought humanity to the brink of extinction. Humanity banded together into a Resistance under the leadership of John Conner, forcing Skynet to attempt to rewrite history by sending a cybernetic assassin, known as a "Terminator", back in time to 1984 to kill John's mother, Sarah, before she can conceive him. John sent a Resistance soldier, Kyle Reese, back in time to protect her. Together, Sarah and Kyle not only conceived John, but destroyed the Terminator, albeit at the cost of Kyle's life.
1995, Los Angeles: John Conner is living in the custody of foster parents after his mother was put into psychiatric care for her ramblings about future nuclear war against humanoid machines and having attempted to bomb a computer factory while preparing her son for the future. Disaffected and angry, John has become a juvenile delinquent, stealing money and whiling away his time in arcades.
Little does he realize at the time, two humanoid machines have traveled back in time from a war-torn future to for him. One is a T-800 model Terminator, the same kind that had been sent to kill Sarah previously. The other is a newer model: the T-1000, which is made of liquid metal and capable of changing its shape and appearance.
The two converge on John, when the T-800 opens fire on the T-1000 and beckons John to follow him. As it turns out, the future John had sent a modified T-800 back in time to protect his younger self after Skynet sent the T-1000 to kill him. Concerned that the T-1000 would target his mother to get to him, the young John asks the T-800 to help him rescue her. The T-800 states that it would be incredibly risky, but John convinces it to aid him.
As the T-1000 infiltrates the mental hospital where Sarah is being held, the T-800 breaks in and fights it off before instructing her: "Come with me if you want to live." Sarah reluctantly accompanies the T-800, with John, as they make their escape from the T-1000. As they travel, the T-800 explains the origins of Skynet, and how an advanced "neural net" processor developed at Cyberdyne Systems by scientist Miles Bennett Dyson would serve as Skynet's basis.
As Sarah gathers her weapons from some old friends and plans to escape with him to Mexico, she notes how much John and the T-800 bonded; she had been with some men since Kyle's death, but none of them were particularly good father figures to John. Ironically, it was a machine, one that was built for the purpose of killing, that proved to be an ideal father figure for the young boy, treating him with respect and protecting him selflessly.
When Sarah sleeps, however, she has a nightmare about Judgment Day, and suddenly changes her plan to assassinate Dyson before he can create Skynet. The T-800 notes that letting Sarah kill Dyson could prevent Judgment Day, but John is unwilling to let his mother become a cold-hearted killer and the two pursue her. By the time they catch up to her, Sarah has wounded Dyson and is poised to kill him, but finds herself unable to finish him off when his family gathers around him.
John, Sarah, and the T-800 explain to Dyson the dire consequences of his work. Dyson, shocked at what he would wrought, agrees to help them destroy his work to stop Judgment Day. He explains that the basis of the neural net processor was from the remains of the original Terminator that tried to kill Sarah; an intact endoskeletal arm and damaged CPU, which must be destroyed.
The four break into Cyberdyne and steal the arm and CPU. Dyson is wounded by the police when they raid the building in search of them, but he manages to rig explosives with a deadman switch to ensure the data for his work on Cyberdyne's computers were destroyed as John, Sarah, and the T-800 escape. They are once more pursued by the T-1000, their chase spilling into a steel mill where the T-1000 damages the T-800 and has John and Sarah cornered. In the end, however, the T-800 emerges victorious when it sends the T-1000 falling into a vat of molten steel.
With their pursuer terminated, all that is left to do is destroy the arm and CPU, which John and Sarah accomplish by tossing them into the molten metal. Their work, however, is not yet over. There is still one CPU remaining: the one in the T-800. It, too, must be destroyed. Since the T-800 cannot self-terminate, it asks Sarah to lower it into the molten steel.
John tearfully begs the T-800 to reconsider, going as far as to order it not to die. The T-800, however, must let himself be destroyed to protect John. The two share a tearful hug, and the T-800 shakes hands with Sarah before it is lowered into the molten steel, giving the two a thumbs-up as it vanishes beneath the glowing liquid metal.
The future going forward is still uncertain...but after everything that has happened, Sarah feels optimistic. After all, if a Terminator can learn the value of a human life, then may be hope for humanity...