In 2017, the economy has collapsed and society has become a police state, censoring all cultural activity. The government pacifies the populace by broadcasting a number of game shows in which convicted criminals fight for their lives. The most popular and sadistic of these shows is The Running Man, hosted by the ruthless Damon Killian (Richard Dawson).
Ben Richards (Schwarzenegger) is a pilot of a police helicopter gunship. He is ordered to fire upon unarmed civilians during a food riot in Bakersfield, California, but refuses to do so. His fellow police officers overpower him and kill the civilians. Richards is turned into a scapegoat by state propaganda for the massacre and is imprisoned. Altered footage of the event appears on national television.
Eighteen months later, Richards is shown imprisoned in a labor camp, where he plots his escape with two other prisoners, William Laughlin (Yaphet Kotto) and Harold Weiss (Marvin J. McIntyre). Prisoners are detained through the use of C-4 explosive collars placed on their necks. Harold Weiss learns the collars' deactivation code, and Richards and Laughlin stage a fight to cover their escape.
The three escape to a shanty town hideout on the outskirts of Los Angeles. Richards decides to visit his brother's apartment in the city. He enters only to find out it is now occupied by news reporter Amber Mendez (Alonso), who works for ICS, the network that broadcasts The Running Man. She explains that Richards' brother was taken away for 're-education'. Enraged, Richards kidnaps Amber and plans to fly to Hawaii. While at the airport, she manages to alert security; Richards is caught. Again altered footage of the event appears on national television, which says that Richards shot innocent people. Amber notices and says to herself, "that's not true", as she saw Ben Richards herself merely trying to escape to freedom, and he carried no weapon at the airport.
Richards is taken to the Running Man studios in downtown Los Angeles, where the host, Killian, requests that he compete. Richards agrees when he learns that Laughlin and Weiss — who were also captured — would enter the show in his place. At an elaborate dance number which starts the show and introduces the host, Killian lies by saying Laughlin and Weiss have been enrolled as runners anyway.
Meanwhile, Amber Mendez pursues the story Richards told her of his innocence. She is caught in the ICS archives while looking for the original tapes of the case, and is subsequently sent into the game grid.
The show is portrayed as a gladiatorial-style competition that takes place in a section of Los Angeles ravaged by an earthquake in 1997, where several "Runners" attempt to survive while being chased by "Stalkers" for cash and prizes. These stalkers resemble professional wrestlers, very big and strong men with ornate weaponry, costumes, and nicknames, and "anything goes". "Subzero" (Tanaka) ice-skates and slashes his victims to pieces with a modified and razor-sharp hockey stick, Dynamo (Van Lidth) sings opera and shoots lightning, Fireball (Brown) has a flamethrower and a jetpack, Buzzsaw (Rethwisch) has a titanium steel chainsaw that can cut through most metal.
Richards grows from an ex-con "villain" to a popular player of the game as he confronts and kills each Stalker he faces — save one, Dynamo (Van Lidth); Richards shows mercy to his opponent pinned under his vehicle, saying that he won't kill a helpless man, "even sadistic scum like you". With the Justice Department becoming increasingly frustrated by a convict doing well on the show, in an off camera moment, Killian offers Richards a job (and good standing with the power elite) as a Stalker, which he declines.
Dynamo electrocutes Weiss and Buzzsaw slashes at Laughlin, killing them both. However, before Laughlin dies he reveals to Richards that there is a rebel base hidden in a quadrant near the Running Man games grid, and to seek out the resistance, so that he and Weiss would not have died in vain.
Running out of options, Killian orders that Captain Freedom (Ventura), a highly decorated ex-Stalker who became a TV-show host and commentator, be brought back to battle Richards. Captain Freedom respects Richards and defies orders to battle him in person, also stating that his attire looks goofy and techy, to which an annoyed Killian orders Captain Freedom out of the studio office.
Meanwhile, Richards and Amber find and join an underground group fighting ICS. They intend to expose the truth behind the show: that previous Running Man "winners" were actually burned alive by the stalker Fireball, and the footage of them enjoying a happy life in a tropical paradise was faked. Amber had smuggled the Bakersfield tapes into the arena, allowing the group to also leak the government's cover-up of the massacre.
With the audience support towards Richards and nothing else to do, Killian stages the death of Richards and Amber in the final match of the episode, through computer-generated imagery, at the hands of a virtual Captain Freedom. Amber watches with horror as her death is onscreen, to which Ben Richards says that the FBI will now hunt them down and kill them in order to make sure they are not still around to tell the truth. Their only hope for survival is to join the rebels in storming the ICS studio building.
Richards leads the rebels to the ICS studios and interrupts the show. The rebels defeat the guards in a shootout. Meanwhile, the spared "Dynamo" confronts Amber alone, and instead of being grateful, tries to rape her. Amber manages to shoot the water sprinkler, spraying Dynamo and causing his electrical power pack to electrocute him. Richards finds Killian, and Killian's big bodyguard remembers an insulting remark by Killian and allows Richards to leave Killian to his fate. Richards straps Killian into the rocket-sled used to transport convicts into the game grid, and launches him. But this time there is no net at the end, and the sled flies into a billboard of Killian, causing a giant explosion.
Killian's death is seen by audiences watching live television: they cheer. Richards and Amber embrace, kiss, and walk off together hand in hand.
