In the near future, Detroit, Michigan is on the verge of collapse due to financial ruin and overrun by crime. The city has signed a deal with the mega-corporation Omni Consumer Products (OCP) to allow them to run the police force, in exchange for allowing OCP to demolish "Old Detroit" and construct a high-end utopia called "Delta City" to be managed by OCP. This moves angers the police officers as they are now beholden to OCP, and threaten to strike. OCP evaluates other options for law enforcement. OCP senior president Dick Jones (Ronny Cox) offers the ED-209 enforcement droid, but when it kills a board member during a demonstration, the OCP chairman (Dan O'Herlihy) decides to go with the experimental cyborg design titled "Robocop" as suggested by the younger Bob Morton (Miguel Ferrer), infuriating Jones.
A recently-deceased officer is needed for the Robocop prototype, so OCP re-assigns police officers to more crime-ridden districts, expecting officers to be killed in the line of duty. One such officer is Alex J. Murphy (Peter Weller), who is teamed with Anne Lewis (Nancy Allen). On the first patrol, they chase down a gang led by Clarence Boddicker (Kurtwood Smith), tailing them to an abandoned steel mill. When Murphy and Lewis are separated, Murphy is gunned down by Boddicker and his gang, and by the time Lewis arrives, he is dead. His body is rushed to OCP, and found to be well-suited for Robocop. Murphy's body is equipped with armor and cybernetic implants, and soon is ready to perform as Robocop. Robocop is given three primary objectives: serve the public trust, protect the innocent, and uphold the law, but the scientists are unaware of a fourth objective in Robocop's programming. Robocop single-handedly cleans up Detroit of crime efficiently, and Morton is given lavish praise for the success. Meanwhile, Lewis finds Robocop displays curious mannerisms that Murphy had done, and realizes that Robocop is Murphy. Robocop himself experiences past events from Murphy's life, and at one point, returns to his former home, finding his wife and son had long since moved away believing Murphy to be dead.
Robocop manages to trace down Boddicker to a cocaine factory, with images from Murphy's death still in his head. Robocop threatens to kill Boddicker, but when Boddicker says he is working for Jones, Robocop find he cannot do so, and instead arrests him. He then approaches Jones at OCP headquarters and attempts to make an arrest, but Jones reveals the fourth objective that prevents Robocop from taking any action against an OCP executive, one that he sneaked into Robocop's programming. Jones goes on to explain his larger goal, to take over OCP. Robocop is unable to fight back against Jones' ED-209's attack, but Lewis, who had tailed Robocop, is able to help him escape, and takes him to the same steel mill to help repair and recover. There, Lewis learns that much of Murphy's personality still exists with Robocop.
Meanwhile, the police force finally go on strike, fearing their jobs will be taken away by the Robocop program, and crime runs rampant. Boddicker, released from prison, kills Morton under Jones' orders, and then regroups his gang to take out Robocop using high-powered guns and a tracking device provided by Jones. They converge on the steel mill, but Robocop and Lewis are able to fend off the attack and kill the gang, though Lewis is critically wounded in the leg. Robocop assures medical help is on the way, and then heads back to OCP, easily taking out the ED-209 guarding it with one of Boddicker's weapons. He arrives in the board room where Jones is offering his ED-209 to replace the failed Robocop. Robocop uses recorded footage that he took when he first approached Jones to show his duplicity to the board. Jones grabs the chairman and threatens to kill him, reiterating that Robocop can not stop him due to the fourth objective. The president immediately dismisses Jones from OCP, nullifying the fourth objective, allowing Robocop to kill Jones. The president thanks Robocop for his help and asks for his name; Robocop answers, "Murphy".
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