Following the events in Aliens , the Colonial Marine spaceship Sulaco experiences an onboard fire and launches an escape pod containing Ellen Ripley, Newt, Hicks, and the damaged android Bishop who are all in cryonic stasis. During the launch, the ship's medical scans of the crew's cryotubes show an Alien facehugger attached to one of the crewmembers. The pod then crashes on Fiorina 'Fury' 161, a foundry facility and penal colony inhabited by all-male inmates with "double-Y" chromosone patterns and histories of physical and sexual violence. After some inmates recover the pod and its passengers, an Alien facehugger is seen approaching the prison dog. Ripley is taken in and awakened by Clemens, the prison doctor, and is told she is the only survivor of the crash. Many of the ex-inmates have embraced an apocopalyptic, millenarian version of Christianity, and Ripley is warned by the prison warden, Harold Andrews, that her presence among them may have extremely disruptive effects.
Suspicious of what caused the escape pod to jettison and what killed her companions, Ripley requests that Clemens perform an autopsy on Newt. She fears that Newt may be carrying an Alien embryo in her body, though she does not share this information. Despite protests from the warden and his assistant, Aaron, the autopsy is conducted and no embryo is found in Newt's body, and Clemens proclaims she simply died in the crash. Meanwhile, Ripley's unusual behavior begins to frustrate the warden and is agitating the prisoners.
A funeral is performed for Newt and Hicks, in which their bodies are cremated in the facility's enormous furnace. In another section of the facility, the prison dog enters convulsions, and an Alien bursts from its body. The Alien soon begins to attack members of the colony, killing several and returning an outcast prisoner Golic to his former deranged state. To get answers, Ripley recovers and reactivates the damaged android Bishop, who confirms that there was an Alien on the Sulaco and it came with them to Fiorina in the escape pod. She then informs Andrews of her previous encounters with the Aliens and suggests everyone work together to hunt it down and kill it. Andrews does not believe her story and explains that the facility has no weapons. Their only hope of protection is the rescue ship being sent for Ripley by the Weyland-Yutani Corporation.
Back in the prison infirmary, while talking to Ripley about the situation, Clemens is killed by the Alien, but when it is about to attack Ripley, it suddenly pauses, then retreats, mysteriously sparing her life. She runs to the mess hall to warn the others, only to see the Alien kill the warden. Ripley rallies the inmates and proposes they pour highly flammable toxic waste, which is stored at the facility, into the ventilation system and ignite it to flush out the creature. An explosion is caused by the creature's premature intervention, resulting in several deaths. Using the medical equipment aboard the Sulaco escape pod, Ripley scans herself and discovers the embryo of an Alien Queen growing inside her. She also finds out that the Corporation truly wants the Queen embryo and the adult Alien, hoping to turn them into biological weapons. Deducing that the mature alien will not kill her because of the embryo she carries, Ripley begs Dillon, the religious leader of the inmates, to kill her, who agrees to do so only if she helps the inmates kill the adult creature first. They form a plan to lure it into the foundry's molding facility and drown it in molten lead by trapping it by closing a series of doors. The bait-and-chase style plan results in the death of Dillon and all the remaining prisoners, except Morse , who pours the lead. The Alien, covered in molten metal, escapes the mold and is killed by Ripley when she turns on fire sprinklers and sprays the beast with water, causing its exoskeleton to cool rapidly and shatter via thermal shock.
While Ripley battles the Alien, the Weyland-Yutani team arrives, including a man named Michael Bishop who looks identical to the Bishop android, claiming to be its creator. He tries to persuade Ripley to undergo surgery to remove the Queen embryo, which he claims will be destroyed. Ripley refuses and steps back onto a mobile platform, which Morse positions over the furnace. The company men shoot Morse in the leg, and Aaron picks up a large wrench and strikes Bishop over the head with it, believing him to be an android. Aaron is shot dead, and Bishop and his men show their true intentions, begging Ripley to let them have the "magnificent specimen". Ripley defies them by throwing herself into the gigantic furnace, just as the alien Queen begins to erupt from her chest. However, as she is dying from the wound, Ripley grabs the creature and holds on to it as she falls into the fire.
The film ends with a sequence showing the facility being closed down, the last surviving inmate, Morse, being led away, and a shot of the Sulaco escape pod as the sound recording of Ripley's final lines from the original Alien film is heard.