Bob Morton is thrilled by the success of his product, and the fame that RoboCop brings him. However, Dick Jones is still very angry about Morton's upstaging him, and vows revenge. Some nights later, RoboCop is at rest when he begins having seizures as memories begin to flow through his head, which we realize are the last things Murphy ever saw: it begins with a flashback shot of Clarence Boddicker shooting him in his hand.
RoboCop then writhes as he imagines Boddicker's gang emptying their shotguns into him, which causes the reading on a graph to go off the charts. Things get to a head when in his dreams, he sees Boddicker pull a pistol and shoot him in the face. RoboCop stands up and leaves to find these men when he is confronted by Lewis. RoboCop has no reaction to Lewis, until she refers to him as "Murphy."
As the cyborg officer leaves the precinct, one of the doctors assigned to RoboCop calls Morton, who shows up and reprimands both Lewis and Reed for interfering with his project. In a different part of town, Emil arrives at a gas station on a motorcycle with a submachine gun and robs the on-duty attendant, who is studying mathematics from a book. Emil then waits as his gas is pumped into his bike.
He is about ready to shoot the attendant when RoboCop shows up, pistol in hand. RoboCop steps towards Emil, saying "Dead or alive, you're coming with me!" Hearing those words, Emil immediately realizes that he's dealing with Murphy, the very man he and the rest of Boddicker's gang murdered at the steel mill. He screams, "We killed you!!" panics, and tries shooting at RoboCop, to no avail.
RoboCop pauses, recalling where he remembers Emil from. Emil then uses the leaking gas pump and lit cigarette to blow up the gas station. As he flees, his motorcycle is shot out from under him by RoboCop. RoboCop takes Emil into custody and uses the police mainframe to look up Emil's data and known associates. One of the names on the list is Boddicker's name. His rap sheet includes charges for the murder of Officer Alex J. Murphy.
RoboCop goes to Murphy's last known address and finds the house up for sale. Walking through it triggers more memories of Murphy's wife and son, until he snaps. Noticing a monitor showing an advertisement for the new model homes, RoboCop's rage culminates in him punching a fist through the screen. Meanwhile, Bob Morton is cavorting with two high-priced hookers in his house. It is going well until the doorbell rings.
Morton goes to answer the door, thinking it's someone delivering champagne, but is shocked when he opens the door and Clarence Boddicker himself enters, carrying a suppressed pistol. While holding Morton at gunpoint, he orders "Bitches, leave!" and the two hookers hastily depart. Once they are out, Boddicker shoots Morton in the legs several times, leaving them unable to stand.
While Morton gasps in pain, Boddicker then takes out a CD and plays a video message for Morton from Dick Jones. Jones tells Morton that he refused to follow OCP protocol and became too ambitious in pushing past Dick's authority, and he's cashing Morton out of the equation. Boddicker primes a hand grenade, pulls the pin with his teeth, and puts it on the coffee table, just out of Morton's reach and leaves.
When the timer hits zero, the grenade detonates and blows up Morton and his house. Meanwhile, RoboCop tracks down Leon Nash to a nightclub, and demands to know where Clarence is. Clarence is at a meeting with a competitor at a competitor's cocaine processing factory. RoboCop arrives and threatens to arrest them all. They open fire and RoboCop kills most of the gangsters and finds Clarence.
He brutally beats Clarence then threatens to break the crime lord's neck. Clarence begs for his life, revealing his connection to Dick Jones. RoboCop realizes that he is a police officer and cannot simply kill Clarence out of revenge. Back at the police station, the officers have voted to go on strike (a result of OCP cutting back their salaries and pension plan, along with having lost 5 officers in the past week).
After a huge gunfight in a cocaine factory owned by a rival gangster, RoboCop brings in Clarence Boddicker and orders him to be booked on charges of murdering police officers. Dick Jones arranges for Clarence to be freed on bail. RoboCop goes immediately to Dick Jones' office. As he marches in, he plays a video recording of Clarence's admission of his connection with Jones.
RoboCop charges Jones with aiding and abetting and attempts to arrest him, but his systems immediately begin to shut down due to a "Product violation." Jones explains that Directive 4 was created by himself to prevent OCPs "product" from taking action against an OCP Official. Jones activates ED-209 to destroy RoboCop and admits that he had Bob Morton killed.
RoboCop is damaged, but manages to escape by running down a flight of stairs (which works because ED-209's massive feet render him unable to climb or descend stairs without falling and throwing a temper tantrum). Several officers attempt to stop RoboCop for his reported "attack" on Jones, opening fire and damaging him severely, when Lewis arrives and rescues him. Lewis and RoboCop retreat to a hidden factory.
RoboCop repairs most of the damage to his robot body and removes his helmet, revealing the face of Murphy. Murphy asks what happened to his wife and son; Lewis responds that they moved away after Murphy's funeral to start a new life. Lewis tries to comfort him but he asks to be left alone. Having been released from jail, Clarence meets with Jones, whom chastises Clarence for involving him, saying that RoboCop's recorded video of Clarence's admission is admissible in court.
Dick orders Clarence to destroy the cyborg; Clarence refuses at first, however, Dick is able to change Clarence's attitude by offering the crime lord free reign during the construction of "Delta City" a planned community that will replace the crime-ridden streets of Detroit, a concept conceived and championed by The Old Man.
Clarence will be permitted to extend his influences in drugs, prostitution and gambling to the workers of Delta City, an offer that Clarence knows is too good to pass upon. Dick agrees to provide Clarence with military-level weapons and gives him a tracking device to find their common enemy. Clarence rallies his gang of thugs to go out and kill RoboCop. Jones had given them large .50-caliber rifles to destroy their nemesis.
The crew tracks RoboCop and his partner to the abandoned steel mill where they're hiding. One by one, they are defeated and killed by Lewis and RoboCop. Lewis, involved in a car chase with Clarence, is injured when the villain shoots her several times. Murphy becomes pinned down by scrap metal dropped on him by Leon, and is immediately attacked by Clarence, who wields a large rail bar.
Murphy is able to stab Clarence in the neck with his built-in data spike, killing the crime lord. RoboCop returns to OCP and, using the giant rifle taken from Clarence's gang, destroys the ED-209 Jones has guarding the entrance to their headquarters. RoboCop interrupts a meeting of the OCP board and openly accuses Dick Jones of murder and states that his programming will not allow him to arrest any executive of OCP.
Over Jones' protests that the cyborg is psychopathic, Murphy plays video of Jones' admitting to Morton's murder, which Murphy had recorded just as Jones activated ED-209 in his office. Jones grabs a gun and takes The Old Man hostage, demanding a helicopter to safely evacuate.
The Old Man angrily fires Jones, voiding Directive Four and allowing RoboCop to take action. RoboCop shoots Dick Jones several times, who falls out a window, screaming as he speeds toward the pavement below. The Old Man thanks the cyborg for his actions, asking what the cyborg's name is. RoboCop pauses for a second before responding: "Murphy."