Recently widowed Walt Kowalski is a cantankerous and prejudiced Korean War combat veteran and retired Ford factory worker. His Rust Belt neighborhood in Metro Detroit has become ridden with gang violence and poor Hmong immigrants, including Walt's next-door neighbors, the Vang Lor family. Walt is estranged from his family, angrily rejecting his son's suggestion that he move to a retirement community in favor of living alone with his elderly labrador Daisy. A chronic tobacco user, Walt suffers from coughing fits, occasionally spitting up blood. As requested by Walt's late wife, her priest, Father Janovich, tries to comfort Walt and persuade him to go to confession. Despite being harshly rejected by Walt, Father Janovich repeatedly tries to get through to him.
Fifteen-year-old Thao Vang Lor is coerced by a Hmong gang led by his cousin, "Spider", to steal Walt's 1972 Ford Torino as an initiation. Walt catches Thao and thwarts the theft; Thao escapes after Walt nearly shoots him. When the gang tries to forcefully abduct Thao, Walt scares them off with his M1 Garand rifle, earning the local Hmong community's respect. Thao's mother makes him work for Walt as penance, who has him do different tasks to improve the local neighborhood. The two soon form a grudging mutual respect; Walt mentors Thao, helping him obtain a construction job. Walt also rescues Thao's sister, Sue, from the unwanted advances of three African-American gangsters. Despite his initial prejudices, Walt bonds with the Vang Lor family. With his cough worsening, Walt consults a doctor who gives him a gloomy prognosis that he conceals.
After the gang assaults Thao on his way home from work, Walt physically assaults a member as a warning. In retaliation, the gang beats and rapes Sue and then injures Thao in a drive-by shooting. The family refuses to report the crimes out of fear. The following day, an enraged Thao seeks Walt's help to exact revenge; Walt convinces him to return later that day. Walt buys a suit, gets a haircut, and finally makes his confession to Father Janovich.
When Thao arrives, Walt takes him to his basement and gives him his Silver Star, telling him that he is haunted by the memory of killing an enemy child soldier that was trying to surrender to him and he wants to spare Thao from shedding blood. He locks Thao in the basement and departs to the gang's residence.
When Walt arrives, the gang draws their guns on him as he berates them for their crimes, drawing the attention of the neighbors. Walt puts a cigarette in his mouth, slowly reaches into his jacket pocket and pulls his hand out quickly. Thinking Walt is brandishing a pistol, the gang members shoot and kill him. Walt's hand opens to reveal his Zippo lighter with the 1st Cavalry insignia. Sue, following Walt's directions, frees Thao and they arrive at the scene. A police officer tells Thao and Sue that Walt was unarmed; the gang members have been arrested for murder and witnesses have come forward.
Father Janovich conducts Walt's funeral, which is attended by his family and the Hmong community. Afterward, Walt's last will and testament is read. Much to the dismay of Walt's family, Walt leaves his house to the church and his cherished Torino to Thao, on the condition that Thao does not modify the car. Sometime later, Thao drives the Torino along Detroit's Jefferson Avenue with Daisy at his side.
