Infernal Affairs II

Hong Kong Police Force Senior Inspector Wong Chi-Shing meets his Triad informant, Hon Sam. Meanwhile, Lau Kin-Ming, who is due to become Hon's prospective spy within the Hong Kong Police Force, assassinates Hon's Triad boss, Ngai Kwun, in a mission for Hon's wife, Mary, who wants Hon to rise up the triad ranks. Mary tells Lau to keep her order secret from all, including Hon.

With Kwun dead, the Big Four triad underbosses intend to stop paying their dues to the Ngai family, but Kwun's successor and son Ngai Wing-Hau manipulates them to continue by blackmailing them on their mutual betrayals. As Lau enlists in the police academy, another police cadet, Chan Wing-Yan, is fired from the academy upon the discovery that he is also a (illegitimate) son of Kwun's, despite his dissociation with the Ngais. The police tell Chan to meet Wong, who enlists Chan as an undercover cop after Chan relays his purpose of being a righteous man. Chan is imprisoned on fake criminal charges to get close to one of Hon's men, Keung, whom Chan helped arrest previously.

Lau has risen as a rookie cop, due to tips on criminal dealings from Hon. Meanwhile, Chan has become a small-time gangster after his and Keung's release from prison. Chan's girlfriend aborts their baby due to his gang association. Hau invites Chan to join the Triad, then tells the Big Four and Hon that he wants to emigrate, leaving them the Hong Kong underworld. Hau sends Hon to Thailand to link up with Thai cocaine smugglers, Hon leaves despite Mary's warning of a trap. Mary meets Wong; it is revealed that Wong ordered her to kill Kwun.

Hau's right-hand-man, Law, an undercover cop, tips off the next deal of Hau's. There, the police arrest Hau, but instead of finding drugs, they find a video located by Hau's hired private investigators, showing Mary and Wong's conspiracy to murder Kwun. Simultaneously, Hau's men assassinate the Big Four. Mary admits the truth about Kwun to Hon. Spooked, Hon and Keung kill many Thai mafia. Trapped, Hon makes a desperate overture to Thai mafioso Paul for an alliance. Paul attempts to shoot Hon; the gun misfires. Hau also sends a man to kill Mary, but Lau kills him to save Mary. The police release Hau, who kills Law after discovering Law's wire. Chan saves Hau from a drive-by shooting, possibly conducted by Lau.

Hau has a car bomb planted in Wong's car, which kills Wong's superior and friend, Superintendent Luk, while Wong is unharmed. Lau hides Mary in a safehouse. When she rejects his romantic advances and attempts to travel to Thailand for Hon, Lau anonymously betrays her to Hau's men, who kill her at Kai Tak Airport.

Lau is promoted to Probation Inspector; Chan is a full-fledged triad member. Hon has a new wife and child in Thailand. Wong admits guilt of conspiracy to murder to an internal investigation, but the department clears him so that he can take down the increasingly powerful Hau. Wong persuades Hon to return to Hong Kong to testify against Hau, as revenge for Mary. Hau is arrested, ruining his attempt to enter politics. Hon's testimony would threaten a short jail sentence for Hau. Chan later passes Wong decisive evidence against Hau.

Triad member John has the Thai mafia take Hon's Thai wife and child hostage. Hon escapes witness protection and confronts Hau. Hon reveals that the Thai mafia were allied with him; they kill John. Hon also proves that Paul is holding the rest of the Ngai family hostage in Hawaii. The police arrive as an infuriated Hau prepares to shoot Hon. Hon accepts his death as revenge for Hau to be killed or jailed for life. Wong shoots Hau to save Hon. As Hau dies in Chan's arms, he discovers Chan's wire.

Wong laments the failure to imprison Hau. Paul insists on executing the Ngai family to tie up loose ends, despite Hon's reluctance. The murders turn Hon into a top criminal target for Wong. Undercover cop Chan joins Keung in Hon's triad, while Lau, Hon's police spy, handles a case for a young woman, Mary, his future fiancée, setting up the events of Infernal Affairs.