The film begins in Istanbul, where James Bond (Daniel Craig) finds fellow MI6 agent Ronson critically wounded and the hard-drive of a nearby laptop missing, the contents of the hard-drive not yet revealed. Bond gives chase to the enemy, a professional hitman by the name of Patrice (Ola Rapace), with the help of MI6 operative Eve (Naomie Harris), first by car, then by motorbike across the tiled roofs of the Istanbul Grand Bazaar, until finally the two men end up on a train. Bond is shot in the shoulder by Patrice whilst trying to make his way onto Patrice's car. The two then begin fighting hand-to-hand on top of the moving train, whilst further up the line Eve has taken position with a rifle ready to take out Patrice. Bond and Patrice are still grappling with each other, denying Eve a clear shot. M (Judi Dench) gives the order for Eve to take the shot, which she does. Bond is hit and falls into the river below, seemingly dead.
A few months later, M begins writing Bond's obituary. The next day she is ordered to a meeting with Gareth Mallory (Ralph Fiennes), the chairman of the Intelligence and Security Committee. Mallory reveals that the missing hard drive contains the names of every undercover NATO agent embedded in terrorist organisations around the world. Mallory suggests that because of M's poor handling of the situation she should retire, or rather be forced to retire with full honours. She refuses and heads back to work. On the way there M's assistant Bill Tanner (Rory Kinnear) discovers that someone is remotely hacking MI6's database from M's computer. They hurry back to MI6 headquarters, but are stopped by police forming a roadblock just outside the building. As M is about to protest to the police officers, a large explosion rips through part of the building, killing several employees.
Meanwhile, Bond is alive in some tropical paradise enjoying nights of alcohol and women. He has faked his death and is simply hiding out. However, he decides to cut his vacation short when he sees a CNN news broadcast about the attack on MI6.
Upon returning to London, Bond confronts M at her house, where she tells him that he has been declared deceased and his property put in storage. He asks to rejoin the service, M agrees but tells him he will have to retake the tests to become a field agent again. Bond is taken to MI6's new base underground and his evaluation begins.
Bond finds himself in poor physical shape. He also finds it difficult to remaster his marksmanship. He painfully removes some of the shrapnel left in his shoulder from where Patrice shot him and sends it off for analysis.
Bond is called in to see M, meeting Eve along the way, who has been suspended from field duty and is now assisting Mallory in his transition to M's position. In M's office, Bond is surprised that one of M's less-tasteful desk ornaments, a white china bulldog with a Union Jack flag painted on its back, survived the explosion. M tells Bond he has barely passed his reassessment, and can resume normal service. Bond meets Mallory for the first time; Mallory tells him not to "cock it up" in relation to his new mission.
The analysis of the shrapnel from Bond's shoulder indicates that it consists of a specialized form of depleted uranium that is used by only a handful of operatives in the world. When shown photos of three people who use such ammunition, Bond immediately recognizes Patrice. Tanner notes that Patrice is a professional hitman, and is also a ghost, with no other known names or aliases. They have word from the CIA that Patrice will be in Shanghai in two days, possibly on another job. M orders Bond to travel Shanghai to find Patrice, interrogate him for the list, then kill him in retaliation for the death of Ronson. After Bond leaves, Tanner inquires about Bond's return to the field, saying he didn't know that Bond had passed his evaluation. M tells Tanner that Bond didn't pass.
Beforehand, she sends Bond to an art gallery to meet the new Quartermaster, or "Q" (Ben Whishaw). Q is young man, who gives Bond a radio locator and new model Walther PPK with a hand-print sensor that makes the pistol usable only by Bond.
Bond travels to Shanghai and follows Patrice from the moment he arrives at the airport. Patrice takes a taxi to a skyscraper in the middle of town. As Bond watches from his car, Patrice shoots the security guard on duty with a suppressed pistol, then gets on the elevator. Bond follows him in and hitches a ride by grabbing a bar on the underside of the elevator cab. When Patrice reaches his floor he enters a server room, closely followed by Bond. He makes his way over to a window, assembles a sniper's rifle, and cuts a circular hole in the glass. Patrice aims his rifle through the hole, training it on an elderly Chinese businessman meeting with a mysterious woman in a building across the street. As two bodyguards pull back a sheet to show the businessman a valuable work by Amedeo Modigliani, Patrice fires his rifle, hitting the man in the back of the head.
At that moment, Bond attacks and wrestles Patrice for control of the weapon. After a short struggle, Patrice is pushed through a broken window, but before he falls, Bond grabs his right arm and demands to know who his employer is. Patrice doesn't respond, Bond loses his grip, and Patrice falls to his death. Across the street, the mystery woman stares at Bond until he disappears under cover of darkness. Bond finds a casino chip from Macau amongst Patrice's equipment.
Back in London, M looks at her computer. A message comes to her in the form of a "Click here to claim your prize" ad. When she clicks "here," a YouTube video comes up: their mystery attacker has posted the identities of five agents, and he promises to release five more every week. One of the messages in the communique reads "Think on your sins".
Back at his hotel room, Bond receives an unexpected visit from Eve, who breaks the news as to what is going on in London. As they flirt, Eve shaves Bond's face and neck for him. Afterwards, Bond travels to the casino, hands in the chip and is given a briefcase containing 4 million euros for the assassination by the cashier, who mistakenly believes Bond to be the hitman. When Bond receives the money, he spots the woman he'd seen in Shanghai. She reveals her name, Sévérine (Bérénice Marlohe) and asks Bond to buy her a drink. Bond sits at the bar and talks to Sévérine. Although she sounds polite and even smiles several times, it looks very artificial. As they talk, Bond notices that Sévérine keeps looking at her three bodyguards nervously, and deduces that they are controlling her, not protecting her. When Bond tells her he wants to meet her employer, she becomes increasingly nervous and gets up to leave. Bond stops her, mentioning the tattoo on her right wrist indicating that she used to be in the Macau sex trade. Sévérine warns Bond that he is about to be killed, but should he survive he should meet her at her yacht and then kill her employer.
Bond is attacked by Sévérine's bodyguards as he leaves the casino. He uses the briefcase to beat two of them before he is tackled off a footbridge by the third into a pit of Komodo dragons. The third henchman grabs Bond's "signature" pistol and tries to shoot him, but the palm-print ID won't let the gun activate itself. At that point, the henchman is grabbed by the Komodo dragons and dragged off into the darkness to be eaten. When Bond is climbing back up onto the bridge, one of the other two henchmen aims a pistol at him and prepares to shoot him, but Eve disarms him. Bond gives Eve the case with the money, telling her "Put it all on red. It's the circle of life." Bond makes it to Sévérine's yacht and hitches a ride, joining her as she takes a shower.
Back in London, some of the undercover agents who were identified in the YouTube video have been executed and their deaths have been posted on the web. Mallory tells M that the Prime Minister has ordered her to appear before an inquiry. M is reluctant, but Mallory is insistent that MI6 be accountable to the people they are protecting, that there are no more shadows to hide in. M counters that the person who is targeting them is from the same place Bond comes from, the shadows.
The next morning, Bond and Sévérine's yacht is approaching an island full of derelict buildings. Before he meets with his host, Bond activates Q's small radio device. Sévérine suggests that they turn back, but the other crew on the boat surround them. Bond and Sévérine are taken hostage and their hands are bound. As they walk through the deserted streets, Sévérine reveals that her employer manipulated everyone who used to live there into evacuating overnight by using a computer to make them think the chemical plant had a leak. At that point, Bond and Sévérine are separated and taken separate ways by the henchmen.
Bond is taken to a room full of computer servers where he is tied to a chair. As he sits down, an elevator descends from above at the other end of the room. The doors open, and off steps Raoul Silva (Javier Bardem). Silva reveals that he is a former MI6 agent whom M betrayed by leaving him to be imprisoned and tortured at the hands of the enemy; M apparently gave him up because she felt his methods were too dangerous. Silva also reveals that M has sent Bond out on a mission despite the fact that Bond failed all of his tests, seem shaking Bond's trust of her.
Bond and Silva then head out to a courtyard where Sévérine is standing, tied up and beaten. Silva places a small shot glass of whiskey on Sévérine's head, chides her to stand up straight, and then challenges Bond to shoot the glass off her head. Bond's shooting hand is unsteady, and misses (perhaps deliberately) but Silva wastes no time in shooting her in the forehead. Bond suddenly overpowers and kills Silva's men, but leaves Silva alive. Silva is baffled that Bond wants to send him back to M by himself. Bond then produces the radio transmitter Q gave him, revealing that he isn't alone. On cue, MI6 helicopters descend over the island.
Back at MI6's underground HQ, Silva has been placed in an elaborate isolation cell. M confronts Silva about his attacks, but he questions her as to why she abandoned him, showing her how his hydrogen cyanide capsule failed to kill him and left his face deformed - it destroyed much of his upper jaw, some of his teeth and his left cheekbone, forcing him to wear a prosthetic. M counters Silva's chiding, saying she'll have his name struck off the memorial wall of MI6. Finding herself having to attend a public hearing with the MP, M leaves, visibly shaken. On her way out, she charges Bond and Q with inspecting Silva's laptop for any evidence. She also tells Bond that Silva's real name is Tiago Rodriguez and that he was one of MI6's best agents, who worked out of Hong Kong before the turnover of the protectorate to China in 1997. When he began to operate outside of MI6's authority, M gave him up to the Chinese government in return for several agents they held as prisoners and the peaceful handover of Hong Kong in 1997.
While Bond watches, Q attempts to access Silva's computer, hooking it up to the MI6 system. He notices that Silva has failsafe protocols that only about six people in the world are capable of creating. Eventually, they manage to decrypt the files. Q determines that Silva's files use obfuscated code to conceal their true purpose.
In his cell, Silva confidently stands up and stretches, zipping up his shirt. A guard asks him if he is going somewhere.
Meanwhile, M and Tanner are in a tribunal overseen by MP Claire Dowar. The inquiry board carefully scrutinizes and criticizes M for her lack of proper handling of the security breaches and for the deaths of her agents.
In Q's lab, Q finds that Silva is using a polymorphic engine to keep his computer coded. Bond notices that some of the letters in the decoder form two words: Granborough Road, which Bond recalls is an abandoned Metropolitan line tube station. Using the word Granborough as a key, the coding on the big screen transforms into a map of subterranean London.
Suddenly, the glass trap doors in the floor flip open, to Q's confusion. Bond realizes Silva has hacked them again. Then the words "System Security Breach" show up on the monitor, followed by a skull and the message "NOT SUCH A CLEVER BOY." Q quickly unhooks the computer, trying to contain the viral upload.
Bond sprints through MI6 headquarters to Silva's cell, but when he gets there, it's too late: Silva has killed both of his guards and vanished. Bond notices that a maintenance hatch in the floor has been removed, and spots Silva escaping into the tunnels. Bond travels down a stairway. Further down the tunnel, he can see Silva heading down another stairway. Bond makes his way down the stairs, draws his pistol, and goes through a service door, finding himself in a London Underground tunnel.
As Bond walks down the track, Q tells him via headpiece that Silva has clearly spent years planning his move, blowing up the regular headquarters aware that MI6 would move down here, and aware of every emergency protocol. Bond returns that he's worried about what happens next: Silva goes after M personally. He gets to the next service door, but to his dismay, it's jammed. He panics, especially when he hears a train approaching. Bond struggles to push the door open, and eventually resorts to shooting the lock, narrowly jumping into the service tunnel just a second before the train goes by.
Silva, meanwhile, makes his way down a stairway at Temple tube station. He comes upon two of his henchmen, dressed as police officers, who slip Silva a package as they pass. Bond enters the tube station through another maintenance door, blending in with a large crowd of commuters. A train pulls into the station. As passengers begin boarding and exiting, Bond asks Q to check the camera feeds for Silva, so he can be sure whether to get on the train. Q is unsure, due to the large size of the crowd. Being one person, he is unable to look at all the feeds at once and he fails to immediately notice Silva boarding the train, now disguised as a police officer. The doors close and the train begins to leave the station, just as Q finally sees that Silva is on board. Bond runs after the departing train, managing to latch onto the last car just in the nick of time. A bystander observes that Bond is "keen to get home."
Claiming to be from Health and Safety, Bond gets the operator to open the door and let him on. Bond walks through each car on the train, searching for Silva. Silva, sensing that Bond has gotten on, is making his way towards the front of the train, one step ahead of Bond. Bond notices that the next stop is Westminster; Bond realizes Silva is heading for M.
Meanwhile, M's inquiry hearing is going as well as one would expect. There is a brief disruption when Tanner receives messages from Q that Silva has escaped. He tries to warn M, but M refuses to leave and look like a coward.
When the train pulls into Westminster, Silva bolts from the first car, and Bond bolts from the second car. Bond pursues him on foot through the crowded tube station. He loses track of Silva momentarily after sliding down an escalator banister. Silva smirks as he manages to avoid being noticed by blending in with some other police officers on patrol in the station. Silva then enters another tunnel through an unmarked door, followed by Bond.
At the hearing, Mallory interrupts MP Dowar for going on for too long, realizing that the hearing is becoming more like a kangaroo court.
Bond follows Silva down a dimly lit corridor into a cavernous room. Seeing Silva's shadow on the other side of the room, Bond picks up his pace. He catches up to Silva just as Silva is climbing a ladder to escape, and fires his pistol several times, missing. Silva acts annoyed that Bond missed him. Bond warns that he won't miss the next time he shoots. Silva replies in kind by showing Bond the latest thing from his 'toy store': a radio. He presses a button, setting off an explosive charge destroying part of the ceiling. Bond asks if that was meant for him. Silva laughs, saying "No! But that is." Just then, a train comes crashing through the freshly detonated hole. Bond dives for cover while Silva escapes.
Silva makes his way to the surface. As he exits the station, a police car driven by his henchmen drives up. Silva climbs in and the car takes off.
As Silva makes his way towards the tribunal, M gets her chance to speak at the inquiry hearing. She talks about how the questions thrown her way as to why MI6's -00 agents are still relative. She states that she sees a different world than they do, and she sees a truth that frightens her: their enemies are no longer known to them. They do not exist on the map, they are not nations, they are individual people. She suggests the other people in the room look around and ask, "What do you fear?"
Meanwhile, Silva and his two men arrive at the tribunal building. The henchmen raise their pistols and shoot the guards manning the security checkpoint without dropping a beat. Simultaneously, Bond emerges from Westminster tube station just as real police and firefighters arrive. He takes off running as fast as he can in the direction of the tribunal building.
M finishes her statement by stating her late husband was a great poetry lover, and some of the poems he read have hit a nerve with her. She quotes Tennyson: "We are not now that strength which in old days moved earth and heaven. That which we are, we are. One equal temper of heroic hearts, made weak by time and fate, but strong in will. To strive, to seek, to find, and not to yield."
Just as M says the last word, the doors at the back of the courtroom fly open and Silva and his men walk in, pistols drawn. Spectators start to stand and scramble, and Mallory leaps over the table, as Silva shoots a bystander sitting at M's table. The police officers guarding the room try to draw their pistols, but are either shot dead by Silva's men or forced to take cover. The board members and bystanders dive for cover, giving Silva a clean shot at M. As he trains his pistol at M, the two stare at each other for several seconds. As Silva prepares to shoot M, Mallory pushes her down. Silva fires, the bullet hitting Mallory in his left shoulder.
As Bond gets closer to the tribunal building, Silva and his men exchange fire with officers on the sides of the room. He enters the building, pistol drawn, and kicks open a side door to the courtroom just as an officer positioned by that door is shot dead. Bond raises his pistol and fires several rounds at Silva, who dives behind a bench and fires back. Bond sees the officer's pistol lying on the floor. He kicks it over to Eve, who pops up and fires several suppressive rounds at Silva. Another officer stationed in the doorway opposite Bond immediately breaks cover, but is shot dead by Silva. Silva then resumes firing at Bond. Mallory sees an opportunity, and breaks cover, grabbing the second officer's pistol while under fire from one of Silva's two men. After a quick exchange, Mallory shelters in the archway of the door, and fires. Several more bullets hit the henchman, and he falls dead. Sometime in this exchange, the other henchman is killed.
Bond's gaze goes from Mallory to a pair of fire extinguishers. He shoots both of them, creating a smokescreen in an effort to drive Silva out of the way. Bond fires several rounds into the smoke, missing. Silva fires two rounds in reply. He then kills a bystander breaking cover, and walks outside to his getaway car, which drives off just as Bond gets outside.
Tanner rushes M out another door to a waiting car. Just as M's door closes, it takes off before Tanner can get in. Bond is driving the car. As they drive away from the scene, Bond calls Q and asks him to make a phony trail for Silva to follow, in efforts to draw him out of hiding. That night, they change cars to prevent them from easily being tracked; Bond switches to his old Aston Martin DB5, with all the defense systems still working. Bond's logic is that any official car used by M and MI6 will be too easily traceable.
Q and Tanner get to work creating an unofficial trail for Silva to follow. Mallory, now wearing a sling as a result of the bullet wound from Silva, surprises them while they are working. They are about to provide an excuse for their actions, but he deduces what they are doing and tells them to carry on.
Bond and M travel to Scotland to 'Skyfall', the Bond family estate. There they meet shotgun-wielding estate gamekeeper Kincade (Albert Finney), who offers his assistance in fighting Silva and his men. With the family's rifle collection sold off months ago, the trio improvise a series of booby-traps around the house in preparation for Silva's expected assault. Kincade tells M a bit of Bond's childhood history: his parents died when he was very young, and James hid in the tunnel leading from the house to the chapel on the moors. Kincade also gives Bond his father's hunting rifle, saying he couldn't bear to see it sold.
The first wave of Silva's men approach, and are taken care of by the booby traps, the DB5's machine guns, Bond and Kincade. However, M is hit in the abdomen by a bullet. The second wave and Silva himself approach by helicopter. Bond orders Kincade and M to escape through the tunnel while he holds off the assault. Bond is pinned down by heavy machine gun fire from the helicopter and by Silva throwing grenades into the house. Bond improvises by blowing up two gas canisters with dynamite. The resulting explosion destroys the helicopter, much of the house and kills all but Silva and two of his men. Bond escapes through the same tunnel as Kincade and M. Silva spots Kincade's torch (flashlight) in the distance and sets off in pursuit. Bond takes a shortcut across a frozen pond but is stopped short by Silva and two of his henchmen. Bond knocks out the first henchmen and kills the second by choking him beneath the surface of the ice. He arrives at the chapel to find Silva asking M to shoot both of them and end their misery. Bond throws a knife into his back, killing him, but M succumbs to her bullet wound and dies, leaving Bond distraught.
Bond returns to London, where Eve finds him on a rooftop, contemplating the skyline. She hands him a small box and tells him that M's will had been read that morning, and that she had left Bond something. He opens it to find the white china bulldog with the Union Jack nestled in tissue paper, and smiles. Eve tells him that she has declined fieldwork and taken a desk job, revealing that her last name is "Moneypenny." Bond walks through a tufted leather door beyond Eve's desk and into a familiar-looking office; Mallory has been appointed the new M and hands Bond an assignment folder asking Bond if he's ready to go back to work. Bond replies, "With pleasure, Sir."
The film closes with a new gun barrel sequence, a 50th anniversary logo, and a title stating "James Bond will return."