In 1983, Marine Corps Gunnery Sergeant Thomas "Tom" Highway finagles a transfer back to his old unit, 2nd Reconnaissance Battalion, Second Marine Division. En route, he meets fellow passenger and aspiring rock musician Corporal "Stitch" Jones, who borrows money from Highway for a meal at a rest stop and then steals his bus ticket, leaving him stranded.
When Highway finally arrives, his new commanding officer, Major Malcolm Powers, seeing him as old-fashioned, assigns him to the Reconnaissance Platoon (part of his assault battalion) which by coincidence includes Jones. The platoon's previous sergeant, awaiting his retirement, had permitted their inactivity, but Highway quickly enacts a rigorous training program. Their desperate plan to intimidate him with resident body builder "Swede" Johanson, just released from the brig, fails after Highway easily overpowers Swede in a fight. Their conditioning provides positive results, and they develop esprit de corps and respect for Highway.
Highway repeatedly clashes with Powers and his assistant, First Platoon Staff Sergeant Webster. They deplore Highway's unorthodox training methods (such as firing an AK-47 over his men's heads to familiarize them with the weapon's distinctive sound). Seeing Highway's platoon as simply a training tool for a supposedly elite First Platoon, Powers proceeds to arrange for First Platoon to beat Highway's men in every field exercise. However, Highway's old comrade-in-arms, Sergeant Major Choozhoo, and his nominal superior officer, the college-educated and well-meaning but awkward and inexperienced First Lieutenant Ring, support him. After learning of his Medal of Honor award during the Korean War, Highway's men gain further respect for him, becoming unified against their perceived common enemy.
Highway attempts adapting his mindset to romance his ex-wife Aggie, a barmaid at a local tavern who is dating the establishment's Marine-hating owner, Roy. He resorts to reading women's magazines to attempt to understand the female mind. Initially resenting their failed marriage, Aggie tentatively reconciles with Highway.
The 22nd Marine Amphibious Unit is then deployed for the invasion of Grenada. After a last-minute briefing on the amphibious assault ship USS Iwo Jima (LPH-2), Highway's platoon mounts their UH-1 Huey and are dropped by helocast into the water before the rest of Powers' Battalion Landing Team. While advancing inland, they come under heavy enemy fire. Highway improvises, ordering Jones to provide cover using a bulldozer so they can advance and destroy an enemy machine gun nest. Their celebration after subsequently rescuing American students from a medical school is short-lived, as Choozhoo discovers that the Cubans are manning a key enemy position that will have to be taken to prevent further incidents. Powers, not wanting Highway to outdo him, orders the recon platoon to advance on the position, but not to attempt any engagement or take the position until First Platoon arrives.
Ring and Highway advance on the position, but come under heavy fire from two armored cars and infantry. The platoon hides inside an abandoned building, but when the Cubans attack, platoon radioman Profile is killed and his radio destroyed, impeding direct communication. Ring proposes making a long-distance call to Camp Lejeune for air support and sends Jones to repair the phone line before borrowing a credit card to complete the call, but enemy fire severs the line as he completes calling in the coordinates for an air-strike. Unsure if the call went through, Highway goes to put out a marker for the air support to locate the position, but is fired upon and knocked unconscious. Assuming that Highway is dead, the platoon exits the building to engage the Cubans, but then the air support arrives and repels the enemy. Ring and a revived Highway then disregard Powers' order, advance upon and take the position, and capture and detain the Cuban soldiers.
Major Powers arrives with Webster, reprimands Ring and threatens Highway with a court-martial. However, the commanding officer of the regiment to which Powers' battalion belongs, Colonel Meyers (a combat veteran who had served in the same battalion as Highway in the Vietnam War), arrives by helicopter and after listening to Powers' and Highway's reports, commends Highway and punishes Powers with transfer back to his former support unit for discouraging the Recon Marines' aggressive fighting spirit.
Highway and his men are warmly received upon returning to the States, with the 1st Marine Division Band playing the official Marine Corps march, Semper Fidelis. Jones informs Highway that he is going to re-enlist and make a career in the Corps, while Highway confides to Jones he is taking mandatory retirement. Aggie is waiting for him in the stands, and the two of them walk off together to start Highway's retirement.