The story picks up years after the events of Chinatown. Private investigator J.J. "Jake" Gittes (Nicholson) has moved on with his life, running a successful detective agency in post-World War II Los Angeles. He gets entangled in a case involving Jake Berman (Harvey Keitel), a client who wants to catch his wife cheating. But when a confrontation during a setup goes fatally wrong, Gittes is drawn into a much bigger web of deceit.

The case leads him into the murky world of real estate, oil drilling rights, and corruption, echoing the water scandal of the first film. Old wounds resurface, particularly memories of Evelyn Mulwray (from Chinatown), which haunt Gittes as he uncovers the truth.