In 1953 Los Angeles, LAPD Sergeant Edmund Exley is determined to live up to the reputation of his father, famed detective Preston Exley, who was killed by an unknown assailant whom Exley secretly nicknamed "Rollo Tomasi", his prototype of "the guy who gets away with it." He volunteers to testify against corrupt police officers involved in the "Bloody Christmas" case in exchange for promotion to Detective Lieutenant, against the advice of precinct captain Dudley Smith.
Plainclothes Officer Wendell "Bud" White is obsessed with punishing men who abuse women, his own mother having been beaten to death by his father. White hates Exley because his partner, Dick Stensland, was fired thanks to Exley's testimony. With gangster Mickey Cohen imprisoned for tax evasion, Smith recruits White to torture and frighten away out-of-town criminals trying to gain a foothold in Los Angeles. While at a liquor store, White also encounters Lynn Bracken, a prostitute resembling Veronica Lake, and former cop Leland "Buzz" Meeks. Both work for Pierce Patchett, whose Fleur-de-Lis service runs high-end prostitutes altered by plastic surgery to resemble film stars.
Sergeant Jack Vincennes is a narcotics detective who moonlights as a technical advisor on Badge of Honor, a TV police drama series. Sid Hudgens, publisher of the Hush-Hush tabloid magazine, tips Vincennes on celebrity criminal activity so that he can make high-profile arrests for Sid's publication.
Exley soon investigates a robbery and multiple homicide at the Nite Owl coffee shop. Stensland was one of the victims. Exley and Vincennes arrest three African-American felons for the crime; they later escape from police custody and are killed by Exley in a shootout. Exley is decorated for bravery. Although the Nite Owl case appears solved, Exley and White investigate further, discovering evidence of corruption all around them. White begins a relationship with Lynn, and recognizes Nite Owl victim Susan Lefferts as one of Patchett's escorts. Lefferts' mother tells White that Stensland was Susan's "boyfriend"; White searches the crawl space under the mother's house and finds Meeks' corpse. He then interrogates Johnny Stompanato, Cohen's ex-bodyguard, who says Meeks was trying to sell a large stash of heroin he had stolen.
Hudgens involves Vincennes in setting up a homosexual tryst between struggling actor Matt Reynolds and District Attorney Ellis Loew, intending to create a lucrative scandal. After Reynolds is found murdered, a guilt-ridden Vincennes joins Exley's investigation to find the killer. Vincennes later confronts Smith with evidence that Meeks and Stensland worked together under Smith's command a decade earlier, and dropped an investigation on Patchett, who had Hudgens photographing businessmen with prostitutes in a blackmail scam. Smith shoots Vincennes, who dies after murmuring "Rollo Tomasi".
The next day, Exley's suspicions are aroused when Smith asks him who "Rollo Tomasi" is. While interrogating Hudgens, Smith arranges for White to see photos of Lynn having sex with Exley, which sends an enraged White to find him. At the police station, White and Exley fight, but stop when both realize that Smith is corrupt. They deduce that Stensland killed Meeks over the stolen heroin, and that the Nite Owl killings were to allow Smith to kill Stensland. Smith's men framed the three African-Americans for the Nite Owl murders with planted evidence. Exley and White interrogate Loew and learn that Smith and Patchett (aided by Hudgens' blackmail photos) have been taking over Cohen's criminal empire, and that the killings were because of Smith tying up loose ends. They later find Patchett and Hudgens murdered.
Smith lures Exley and White into an ambush. After the pair kill Smith's hitmen in a gunfight, White and Smith wound each other. As Exley holds Smith at gunpoint, Smith assures him that he can "explain" everything to the arriving police and Exley will be promoted. Smith walks away toward the newly gathered squad cars, but Exley shoots him in the back, killing him.
At the police station, Exley explains what he, Vincennes and White learned about Smith's corruption. The LAPD decides to protect their image by saying Smith died a hero in the shootout, while awarding Exley a second medal for bravery. Outside city hall, Exley says goodbye to Lynn and White before watching them drive off to Lynn's home in Arizona.
Russell Crowe as Wendell "Bud" White
Guy Pearce as Edmund "Ed" Exley
Kevin Spacey as Jack Vincennes
James Cromwell as Capt. Dudley Smith
Kim Basinger as Lynn Bracken
Danny DeVito as Sid Hudgens
David Strathairn as Pierce Morehouse Patchett
Ron Rifkin as District Attorney Ellis Loew
Graham Beckel as Det. Richard "Dick" Stensland
Amber Smith as Susan Lefferts
John Mahon as Police Chief
Paul Guilfoyle as Meyer "Mickey" Cohen
Matt McCoy as Brett Chase
Paolo Seganti as Johnny Stompanato
Simon Baker Denny as Matt Reynolds
Tomas Arana as Michael Breuning
Michael McCleery as William Carlisle
Shawnee Free Jones as Tammy Jordan
Darrell Sandeen as Leland "Buzz" Meeks
Marisol Padilla Sánchez as Inez Soto
Gwenda Deacon as Mrs. Lefferts
Jim Metzler as Councilman
Brenda Bakke as Lana Turner
based on James Ellroy's 1990 novel of the same name, the third book in his L.A. Quartet series