The story opens in 2049, thirty years after the events of the first film. An on-screen text states that the Tyrell Corporation has collapsed decades before, in the wake of violent revolts involving their Nexus-6 through -8 Replicants, forcing the company into bankruptcy. After the world's ecosystems collapsed in the mid 2020s, famine swept the Earth, killing millions. With his invention of synthetic farming, a wealthy businessman named Niander Wallace (Jared Leto) ended food shortages and acquired Tyrell's remaining assets to form his own corporation. The Wallace Company has reinvigorated the Replicant industry by mass producing the Nexus-9 Replicants, a new generation of artificial humans with modified behavior to make them more obedient than the older models. These Replicants have implanted memories and open-ended lifespans, and are still used for slave labor on the off-world colonies (the Moon, Mars, and the moons of Jupiter, Saturn, etc.), but some are also used as Blade Runner units, hunting down and "retiring" the few remaining older model Replicants that are still at large.
In the opening scene, Agent K (Ryan Gosling), one of these Nexus-9 Replicants, travels to a protein farm outside Los Angeles in his flying Spinner vehicle, where he has tracked down an older model Replicant called Sapper Morton (Dave Bautista), who was part of a group of Series 8 Replicants that had gone AWOL. After a brief but violent fight, Morton tells him that as a newer model, K cannot come close to knowing what it means to be human. He implies that K would never help humans kill his own kind if he had ever witnessed the kind of "miracle" that he has. K retires him and is ready to leave when he notices a flower placed beside a dead tree in the desolate landscape next to the farm. This prompts him to thoroughly scan the area, which reveals a chest buried under the ground. He requests his office to send a forensic team to unearth it.
K returns to the LAPD office, where he undergoes a standard 'baseline test' for Replicants and passes it. He then goes home to his apartment in a seedy area of town. He spends his time at home with a holographic woman named Joi (Ana de Armas), a futuristic form of AI (Artificial Intelligence) and has apparently formed a deep bond with her, despite the fact that they cannot physically interact. For this reason, he has bought her a mobile hologram projector which allows him to free her program from its home-based console. He can now take Joi outside on the top of his apartment building in the pouring rain, and it also allows her program to touch objects. Joi is extremely happy, but K is called back to the station before they can experiment with Joi's new capabilities any further.
Downtown, the Forensics team has discovered that the chest contains a human skeleton and a lock of hair. They belong to a female who most likely had complications during childbirth 30 years before. Superficial cuts in the bones suggest an emergency Cesarean section as the cause of death. Upon closer inspection, K locates a serial number engraved on one of the woman's bones, indicating that the skeleton wasn't from a human, but a Replicant female. The identification causes quite a stir since Replicants were previously unable to reproduce. K's superior, Lieutenant Joshi (Robin Wright), reminds him that if the public knew that the line between humans and Replicants is blurring, or disappearing altogether, it would tear apart what remains of civilization. She commands the team to destroy the evidence, and orders K to burn down the farm, track down the Replicant child, and retire it, despite the mixed feelings he may have about retiring something that was born - and has a soul. Before leaving, K takes some of the female Replicant's hair.
K goes to the Wallace Company to inquire about the serial number and hair of the female replicant. It is housed in the old Tyrell pyramid, although now much more austerely lit. A clerk tells him that the number belongs to an older model Replicant; information may be hard to find, given the fact that an EMP (Electro Magnetic Pulse) event called the 'Blackout' in 2022 destroyed almost every digital file the company had before that date. All that remains is some raw hard-copy data. Fortunately, there appears to be something left. K is helped by a Replicant woman called Luv (Sylvia Hoeks), who gives him access to what appears to be an old memory file containing an audio recording. It belonged to an experimental Replicant named Rachael, who went missing 30 years before. She can be heard talking to a Blade Runner called Rick Deckard (Harrison Ford). K detects a very strong connection between the two. Luv thanks K for finally being able to close the case on Rachael.
K does some research on Deckard, and finds his old colleague Gaff (Edward James Olmos) who is now living in a retirement home. Gaff tells him that Deckard and Rachel fell in love, and eloped. K asks if Gaff knew that Deckard would one day leave society; Gaff confirms, saying that there was something in Deckard's eyes that told him he was finished hunting Replicants.
Luv reports what she has learned to Wallace, who is blind but can see with the help of small drones. He is just witnessing the activation of a new female Replicant. He seems sympathetic to his creation, yet he also carelessly slashes the woman's abdomen, apparently frustrated by the fact that she cannot bear children. He laments that humanity has only founded less than ten off-world colonies; in order to spread out, much more Replicants will be necessary. The only way he can meet the ever-growing demand for more Replicants is to engineer specimens who can procreate. Tyrell obviously learned how to do this, but his records were destroyed in the Blackout. The only way to learn Tyrell's secrets is to find Rachael's child. He commands Luv (who is emotionally shaken by his actions but remains obedient) to obtain Rachael's remains and follow K to locate the child.
Meanwhile, K is walking through the city's entertainment district to buy dinner, where a mysteriously cloaked woman commands three Replicant prostitutes to find out what he knows. One of them, Mariette (Mackenzie Davis), tries to seduce him for sex, but noticing he carries a holographic projector, she figures that he is not into "real girls", and leaves. In the meantime, Luv has entered the police station to retrieve Rachael's remains, coldly killing the forensic agent who discovers her doing it.
K returns to Sapper's farm and locates a baby sock and a picture of another woman holding the baby, implying that Sapper and several other Replicants have been protecting Rachael's secret for decades. He also finds a date carved into the bottom of the tree, 6-10-21, which visibly upsets him. He burns the farm and returns to LA. Reporting his findings to Joshi, she tells him about the disappearance of Rachael's remains, and asks him about his most precious childhood memory. Even though he knows that it must be an implanted one, K says that he clearly remembers being chased through an old factory as a kid by a group of older boys. They wanted to take away his wooden carving of a horse, so he hid it inside an old furnace. K remembers that the horse had a date on it, the exact same date carved into the rock, a fact that he doesn't share with Joshi. Joshi suggests he try the DNA bank to identify the child.
Assuming that the date carved in the tree and the horse is meant to be a date of birth, K starts to dig into the DNA bank to find someone born on June 10, 2021. Again, only raw data remains, but he finds records of two children born that day, a boy and a girl. They have the same DNA... which is an impossibility (only identical twins have the same DNA, and they should be of the same gender), so K suspects that one has been copied from the other. The DNA data came from an orphanage outside the city. The girl later died from a genetic disease, so K theorizes that the boy may have been hidden by the Replicants in the orphanage, which is in the ruins of San Diego.
He travels there in his Spinner but is shot down by a tribe of feral scavengers who live among the ruins of a massive old ship breaking yard. They try to attack him, but Luv, who is keeping an eye on him from above through remote camera surveillance, uses precision bombs to repel them. After repairing the damage to his spinner, K proceeds to the orphanage, an old abandoned section of a ship, where the caretaker (Lennie James) is clearly using the children as cheap laborers. He coerces the man into showing him the old administrative files, but finds that the sections he is looking for have been completely torn out. While exiting, he notices how familiar the surroundings feel to him. He walks deeper into the ship section, and is shocked to find the location and the furnace from his memory; the wooden horse is still hidden inside it. K returns to the LAPD station in an upset state for another baseline test, which does not go smoothly.
Not knowing what to make of the revelation, he returns home. Joi is convinced that this means that his childhood memory is real, and K is Rachael's son, suggesting he was born instead of manufactured, and that he has a soul, as opposed to other Replicants who are thought to be 'soulless' and thus inferior to humans. She thinks he deserves a human name, and starts to call him 'Joe'. K is still not convinced that the memory is real, so Joi suggests that he should contact an expert on implanted memories.
K arrives at the lab of Dr. Ana Stelline (Carla Juri), who designs memory implants for Wallace's Replicants. Dr. Stelline is happy to see someone, being kept inside a dome at all times since she suffers from a compromised immune system, and can't be exposed to other people. Her parents left Earth for one of the off-world colonies, but she wasn't allowed to come along because of her disease. Her youth was lonely, but this caused her imagination to flourish, making her one of the best creators of artificial memories. K asks how fake memories can be discerned from real ones. Dr. Stelline says that fake memories tend to be too detailed, since real memories are 'messy' as they tend to reflect an emotional rather than a photographic recollection; but a good fabricated memory always contains something personal of the maker. K asks her to take a look at his memory, and give her thoughts. A special device allows Dr. Stelline to see the memory in his head. Overcome by emotion, she says the memory is real; K leaves in a fit of anger. As he goes outside, he is apprehended by the police.
K is confronted by an angered Joshi for failing his last baseline test, which may mean that he is going to be retired. K tells her that he is in his current state because he succeeded in his mission: he has killed Rachael's offspring, who was so well-hidden that even he didn't know who he was. Joshi agrees to suspend him, and gives him 48 hours to disappear. Going home, he finds Mariette in his room. Joi reassures him that this is her doing, because she needs Mariette for something. She synchronizes her holographic program with Mariette, so she is able to steer Mariette's body and make love to K. The next morning, K seems to feel awkward about the unexpected threesome. He is called to the station, and leaves without saying goodbye, but not before Mariette placed a tracking device in his coat. Joi tells Mariette to leave; Mariette scoffs that, having been inside Joi's consciousness, she noticed that not much was there (showing that Replicants are not above feelings of superiority either).
K tells Joi that people will be coming for him. Joi insists on coming with him so that she cannot reveal what she knows; K is reluctant as transferring her to the mobile projector would put her at risk of being lost if the projector is damaged, but ultimately accepts. She instructs him to destroy the antenna in the projector so that she cannot be moved to another device and remove any chance of tracking it. Luv, who is monitoring the position of the projector, is no longer able to track K.
In the meanwhile, Luv has arrived at the station, asking Joshi to cooperate and tell her where K is. Joshi refuses, even when Luv's initially friendly disposition changes drastically. She tortures Joshi for information, but to no avail, so Luv kills her and uses her computer to find locate K.
K has taken the wooden horse to a specialist, Doc Badger (Barkhad Abdi), who finds traces of radioactive tritium in the wood. They deduce that there is only one area nearby that can account for the type of wood and such high radiation readings. K leaves the city, taking care not to be noticed, although Luv is unknowingly tracking him.
K arrives in the abandoned ruins of Las Vegas, and enters a deserted hotel/casino. Judging by the booby traps, he figures he is in the right place. It doesn't take long for Deckard to show himself, keeping K at gunpoint in the supposition that K is there to kill him. They fight for a while before Deckard becomes convinced that K is only there for answers. He confirms that Rachael was pregnant, but has never seen the child, nor does he know its whereabouts. Deckard was still actively hunted, so out of love for her and the child, he left a still-pregnant Rachael in the care of people who could protect her, hoping that his ignorance was the best way to keep everyone safe. He taught the other Replicants how to tamper with birth records and how to avoid capture. After a while, Deckard notices that someone has entered the area. Convinced that K has been followed, they proceed to Deckard's Spinner to flee, but a rocket grenade destroys the Spinner and incapacitates both Deckard and K. Luv enters with a few henchmen, and although K dispatches some of them, Luv fights back and badly injures him. She notices K's mobile projector and destroys it, effectively killing Joi, to K's anguish. Leaving him for dead, she kidnaps Deckard and takes him back to Wallace.
K's wounds are tended by a group of Replicants who have been tracking him as well. They include Mariette and are part of a Replicant freedom movement. Their leader, Freysa (Hiam Abbass), reveals how she was there when Rachael died in childbirth, and how her group of rebellious Replicants, including Sapper, went to great lengths to hide the baby, as they saw the child as a living miracle. If Replicants could have children, the human world could no longer deny them their rights and freedoms. She confirms that the Blackout was their deliberate attempt to erase as many digital files as possible, in order to protect the secret of how Rachel was able to have children, and to prevent everyone, including the child, from being found. K tells her that he is Rachel's child, but Freysa tells him that the child was a girl. K is confused, and asks how he could have a real memory of Rachael's offspring if he isn't her son. Freysa answers enigmatically that this is also part of the puzzle. The memory of the wooden horse was apparently implanted in all other Replicants, and became a unifying motivator for freedom. Thinking back on all he has discovered so far, K deduces that the memory must have originated with Dr. Ana Stelline herself (explaining her emotional response to it), and that she is Rachael and Deckard's lost daughter. The Replicants urge K to return to LA; Wallace will do anything to get clues from Deckard about the Replicant resistance movement. If he succeeds, he may be able to create Replicants with reproductive capabilities, thereby creating a self-perpetuating army of slaves. The resistance wants this prevented at all costs, even if it means killing Deckard.
K finds himself back in LA, observing a giant three-dimensional ad for the Joi hologram with great sorrow, knowing that the Joi he loved is gone forever. At the Wallace Company, Deckard is brought to Wallace, who shows him Rachael's remains, calling it the lock and Deckard the key to unraveling the mystery of Replicant reproduction. Deckard maintains that he has no idea who or where his child is. Wallace insinuates that Deckard's first meeting with Rachael was set up from the beginning, and that it was always the intention that they would end up together and reproduce. He starts a playback of the first conversation between him and Rachael, which emotionally affects Deckard, who still refuses to cooperate. Wallace then tries to entice him with something that he really covets, in exchange for information on how to find Freysa. A woman walks in from the shadows, and she appears to be an exact copy of Rachael as she appeared to Deckard 30 years ago, down to the clothing and hairstyle she wore. Deckard is shocked and moved, but he ultimately dismisses this Rachael as a fake, stating that the real Rachael's eyes were green. Frustrated by his failure, Wallace immediately has Luv execute the fake Rachael. He orders Luv to take Deckard to one of the off-world colonies, where they have the means to make him talk.
Luv takes off with a hand-cuffed Deckard in a Spinner with two escorting vehicles, and flies along the LA shoreline. K catches up, using his Spinner to destroy the escorts and blow Luv's vehicle from the sky, forcing it to crash on the beach. K lands next to it and after an exchange of gunshots, he gets into a fight with Luv. He receives severe wounds from Luv's relentless punches and knife, and Luv leaves him for dead. She re-enters the vehicle, trying to free Deckard from his cuffs as the Spinner is being dragged into the sea by tidal waves, but then K enters. He fights with Luv and pushes her down under water with all of his power, finally drowning the life out of her. He manages to release Deckard just before the vehicle sinks completely. Deckard says that he should have let him die; K states that he did: the world will believe that Deckard went down with the vehicle.
He takes Deckard to Dr. Stelline's office, and tells him that all his best memories are hers. Deckard asks him why he did what he did; K simply urges him to enter the office. As Deckard goes in and meets his unsuspecting daughter who is enjoying a cloud of artificial snow, K lies down on the steps outside, slowly succumbing to his wounds. He looks at the real snow falling down, apparently at peace with the part he played.