Set approximately three years after the events of First Blood, Rambo finds himself confined in a labor camp prison in the USA. His situation takes a turn when his former commander, Colonel Sam Trautman, pays him a visit. Trautman presents Rambo with an opportunity for release, following a military court conviction stemming from the destruction and theft of military and private property (though not for murder). The catch? He must undertake a dangerous mission to infiltrate Vietnam and search for American POWs who are rumored to still be held captive by the Vietnamese.
Rambo travels to Thailand alongside Trautman, where they meet Marshal Murdock, an American bureaucrat overseeing the operation. Murdock informs Rambo that the American public is clamoring for information about the POWs and insists that he must photograph them rather than attempt a rescue. Despite the tension between the USA and Vietnam, Rambo reluctantly agrees to the mission, albeit under these strict conditions.
After parachuting into the dense jungles of Vietnam, Rambo loses most of his equipment, retaining only his trusty knives, bow, and arrows. He encounters a local agent named Co-Bao, portrayed by Julia Nickson, who wishes to escape to America. Together, they embark upstream with a group of river pirates.
Upon arriving at a POW camp, Rambo defies his orders and rescues an American prisoner from being crucified. However, his actions trigger a massive hunt as a large Vietnamese patrol is dispatched in search of the unknown intruder. In a twist of betrayal, Rambo and his companions are ambushed by the pirates after narrowly escaping a Vietnamese gunboat. He sacrifices his chance for their safety, destroying the gunboat and the pirates with an RPG.
Yet, when Rambo calls for extraction, his request is denied by Murdock, who worries about the implications of their covert operation being exposed. Subsequently, Rambo and the American POW are recaptured. Bound to an oxen yoke, Rambo is subjected to brutal torture by a Soviet officer, Lt. Col. Podovsky, and his fearsome henchman Sergeant Yushin, enduring harsh conditions where he is coerced into telling the American military not to send in any further rescue teams.
Meanwhile, Co disguises herself as a prostitute to infiltrate the enemy camp. After a heated exchange, Rambo, instead of complying with Podovsky's demands, threatens Murdock over the radio, declaring, > "I'm coming to get you.” With Co's assistance, he manages to escape, and they share a moment of intimacy and promise to flee together. Tragically, their reunion is cut short as Co is killed in an ambush. Heartbroken, Rambo seeks vengeance, eliminating the attackers and burying Co in the jungle.
Rambo soon becomes a one-man army, engaging in guerrilla warfare. He destroys an enemy camp using his explosive arrows and commandeers a UH-1N Twin Huey helicopter while dispatching Sergeant Yushin. He launches a furious assault on the POW camp, successfully liberating the captives and piloting them towards safety in Thailand.
As they make their escape, they are pursued by Podovsky, who relentlessly fires upon them with his Mil Mi-24 gunship. Even after sustaining grave damage to his helicopter, Rambo finds a clever way to fake his death and counterattacks, obliterating Podovsky's helicopter with a LAW 66mm rocket.
After returning to base, Rambo vents his fury at Murdock's command center, holding him at knifepoint and demanding the rescue of any remaining American POWs in Vietnam. As Trautman attempts to comfort him, Rambo expresses his longing for his country to love its soldiers as deeply as they love it. In a poignant farewell, Trautman asks, "How will you live, John?" To which Rambo replies, "Day by day." The film concludes with Rambo walking off into the distance, leaving his mentor behind as the credits roll.
