Commando 3 story is based around Shiva (Ajith Kumar), a CBI officer, and his efforts to foil the terrorist John Chinnappa (Suman). Major Shiva is simultaneously attempting to mend relations with his father's estranged first wife and his half-brother Narain (Navdeep). Complications ensue.
Major John Chinnappa is a scientist who had created tablets by operating on human guinea pigs. His ploys have always been controversial but inconclusive due to the lack of witnesses. However, an ex-gang member, General Ram Prasad (Devan), became a police approver and is on the verge of revealing Chinnappa's ploys to the police. However, he is on the run to avoid charges. The case falls to Lieutenant Karthikeyan (Nassar), Major Shiva's father, who had ordered his decommission, who assigns his son to go and help solve the mission.
Karthik tells Shiva to attend college in Tamil Nadu - St. John's College, Ooty - to protect Ram Prasad's daughter, Pooja (Piaa Bajpai), from meeting with her father. Shiva pleads that he has never seen a civilian college before and doesn't know much about the current generation. The General points out that, by a strange coincidence, Pooja attends school in the same town where Ram Prasad is hiding. Shiva can protect Pooja and look for Ram Prasad at the same time. Shiva goes undercover as a student returning to college after many years away taking care of the family business. He is much older than the other students, who at first make fun of him because of his lack of new-generation styles. He also has to deal with the many goofy teachers as well the idiotic forgetful principal of the college, Albert (Jayaram).
He finds Narain, who is later revealed to be Shiva's brother. Pooja is Narain's best friend and he is secretly jealous that other girls can get his attention but she can't. Shiva saves Pooja from John Chinnapa's men, who kidnap her while Narain and others think it's a prank. He later becomes a sensation among the students and teachers. He befriends Narain and Pooja and falls in love with the chemistry teacher, Mallika (Nayantara), after being attracted by her beauty and in a bid to convince other students that he is one of them. During his regular jogging sessions Shiva spots Ram Prasad and chases him till he escapes with the help of an helmet-clad bike rider who is later revealed to be Narain. Pooja comes to know that Narain has been helping her father and feels cheated by him.
Narain tries to apologise to Pooja many times, but she refuses to talk to him. Irked by this, Narain drinks and explains his actions when John's men come again to kidnap Pooja. They beat up Narain, but Shiva comes to their rescue. Narain and Pooja patch up after the fight sequences. Shiva takes Narain to his home where he learns that Narain is his brother and meets his mother. The flashback sequences describe Shiva's childhood (he is an orphan) and explain why his mother and father live separately.
The next day when Pooja introduces Ram Prasad to Shiva, Shiva arrests him - much to the disappointment of Pooja and Narain. Then everyone in the college including Mallika learns that Shiva is a policeman.
Shiva then drives Ram Prasad straight to John Chinnapa's hiding place, avoiding the traps that he had set. A fight ensues between Shiva and John Chinnappa's men in which John is finally killed. In the final scenes Mallika is shown with Shiva's parents and brother while he has gone to Afghanistan as part of another mission.
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