New York city Homicide detective John Moss [James Woods] is on the trail of a psychotic serial killer known as the "Party Crasher" [Stephen Lang]. He kills a drug dealer in a nightclub,and after a chaotic chase, manages to elude Moss and his colleagues once again.
In Beverley Hills, California, Hollywood movie star Nick Lang [Michael J.Fox] is becoming increasingly tired of playing the same teen idol roles, and his latest movie Smoking Gunn 2, an Indiana Jones style adventure, is the final straw. He decides he wants to get the role in a gritty new film and ditch his squeaky clean image. Having seen John Moss all over the news, he wants to go to go undercover in his police department to do his research for the lead detective role.
Moss is furious when his Captain, Brix, [Delroy Lindo] tells him about this, but he's no choice. Lang has pulled some strings with the mayor and Brix himself is a Nick Lang fanatic. He tells him that Lang is going to be teaming up with him under the alias of Ray Casanov, and that for the next two weeks he's going to "babysit" him and show him around and tell him how to be a cop. But Moss has other plans - he wants the Party Crasher and has no intention of letting a pampered actor get in the way.
Moss talks to a gang known as the "Dead Romeos" and extracts information about the gun dealer who does business with the Party Crasher, while Nick gets very excited about finding himself caught up in a gang war shootout, and then called to another murder the serial killer has committed. Already frustrated with Nick, things get worse for Moss when he finds out that he has to take him in as well, and then during a date with his girlfriend Susan [Annabella Sciorra], Nick shows up to join them.
One night, Moss and Nick go to an old warehouse with a lead on the Party Crasher, and now armed with a gun, Nick shoots a man trying to escape. But Moss tells him it was an innocent civilian, and in order to cover up the incident, it's best that Nick goes back to Hollywood and lets him deal with it. But Nick feels guilty and instead of getting on a plane, he decides to go back to the police station and plead guilty. However, he sees the man there who he supposedly shot and killed, and realises that he is in fact a cop - Moss set the whole thing up to get Nick out of town.
Nick takes off in a police patrol car to find Moss, but Moss is in pursuit of the Party Crasher. He sees him pursuing the killer into a cinema (that coincidentally is screening Smoking Gunn 2). A shootout takes place and Moss wounds the killer, but he manages to escape from the ambulance and into the back of Nick's car. Nick becomes brave and scares the Party Crasher with his reckless driving, but after the car flips over, he escapes once again.
Susan arrives at Moss's apartment to tell him that she can no longer date him because his job is too dangerous, but upon leaving she is kidnapped by the Party Crasher (which Nick predicted). Moss and Nick go to rescue Susan at the top of a Nick Lang billboard. Nick bravely proves his worth by saving Susan from a fall, and saving Moss's life and taking a bullet. Moss kills the Party Crasher by throwing him off the top of the billboard.
Some time later, Moss and Susan are at the cinema with his fellow officers watching Nick's latest movie, which is revealed to be called The Good, The Badge and The Ugly, and Moss is not happy when he realises that a lot of the dialogue in the film consists of things that he has said to Nick during their partnership. "That little son of a bitch has stolen my life".