The film opens eleven years prior to the original film in 1991, with Inspector Wong discussing the death of his first partner in the line of duty with an initially unseen companion. This is revealed to be Hon Sam, the triad boss from Infernal Affairs. At this stage in the saga he is a follower in Ngai Kwun's triad family, and is Wong's informant. Ngai Kwun is then assassinated in Mongkok by the young Lau Kin-Ming, who works for Sam's wife Mary because Ming is attracted to her, but is unwilling to express this due to his lowly position in the gang. Mary ordered the killing because she wants Sam to take Kwun's place as leader of the triad. But she did so without Sam's knowledge and urges Ming to lie low for a while before he attempts to join the police force and become Sam's mole.
Kwun's middle son Hau rises to take his father's place as triad boss, as he is the only Ngai sibling directly involved in the crime business. Yan, a police cadet coming to the end of his training is confronted by Hau and his henchman Law. Hau reveals to his half-brother that their father has died. Yan is discharged from the Hong Kong Police Force due to the use of his mother's surname to hide his family connection to the Ngai triad family (Yan's full background was not revealed in the first film).
With Kwun dead, the triad bosses known as The Big Four and Sam debate not paying their tithe to the supposed weakling Hau. But Hau proves himself to be an adept and understated heir to Kwun and blackmails all four with his knowledge of their mutual betrayals one by one. Sam has covertly remained loyal to Hau and acted as an agent provocateur in this affair, much to Mary's dismay. Ming joins the police force, whilst Yan is offered a way by Wong to remain a cop; by going undercover into prison.
The second act takes place in 1995, with Yan out of prison as a small time gang member and Ming as a rookie police officer. Yan's continual association with Sam leads his girlfriend to have an abortion.
The ruthless yet honourable Hau wishes the troubled Yan to be integrated back into the Ngai family and invites him to his daughter's birthday party, where he brings him closer into the gang business as well.
Wong's partner Superintendent Luk learns that Yan is the police mole and questions where Yan's true loyalties lie; with the police or his brother. Yan reassures him of his dedication only to the mission.
Hau tells the Big Four and Sam he is retiring to Hawaii with the whole Ngai clan and to divide the Ngai crime business between them. He rewards Sam for his years of loyalty by sending him to a drugs contact in Thailand with the promise of total control of the cocaine racket, a business opportunity that the Big Four have not foreseen, and which he believes Sam will become a master of.
Mary is revealed to have conspired with Wong in the assassination of Kwun. Luk has had his own informant in the Ngai gang for 7 years, who tips him off about a change in Hau's departure plans. Hau is arrested by Luk and Wong making a drug deal, but it transpires Hau feigned this; the two men he met turn out to be private detectives he hired to investigate Kwun's murder. He was taking delivery of the final evidence; videotaped surveillance of Wong and Mary discussing the assassination in a hotel room, which is leverage to prevent the cops interfering with his business.
Hau's real plan was to assassinate the Big Four and Sam, whom he believes is Mary's co-conspirator. Mary phones Sam in Thailand revealing at the last minute that she arranged the hit on Kwun. Sam escapes the ambush but is confronted by a Thai gangster friend in the airport. Sam offers his own gun to the gangster, believing in their friendship. The Thai regretfully apologises for his orders and shoots Sam.
Ming saves Mary from Hau's assassin and they go into hiding for two months, where he reveals his true feelings and offers to protect her. She rejects him as she is the boss's woman, and goes to Kai Tak airport to fly to Thailand to find the missing Sam. But as she arrived, she is hit by a car at the airport in a hit and run apparently orchestrated by the bitter Ming.
Luk goes to Wong's apartment after he's acquitted in a tribunal hearing and forgives him for the murder conspiracy, but is then killed by a car bomb meant for Wong.
Law is shot dead by Hau in the aftermath of the assassinations, as he knew that he was Luk's informant and an undercover cop. Hau then shows Yan the hidden wire in Law's jacket.
The third act is set in 1997 against the backdrop of the handover of Hong Kong to China. Ming is one of the officers involved with the ceremony, Yan has taken Law's place by Hau's side.
Hau is attempting to make the family respectable and go into politics, but is arrested at a government party, as the police now have enough evidence to bring him down. They are aided by a star witness - Sam, who survived the shooting in Thailand and is brought back to Hong Kong by Wong, who reintroduces him to the newly promoted Ming.
Sam escapes police custody with Ming's help and confronts Hau and his gang, alone. Hau has kidnapped Sam's Thai wife and child to prevent him testifying. But Sam outmanoeuvres Hau by revealing that his Thai friends are holding the entire Ngai family hostage in Hawaii, and the Thai woman Hau holds hostage is actually just his maid.
The climax of the film is a standoff between Hau's gang and the police, with Hau about to shoot Sam. Wong shoots Hau dead instead, who dies in Yan's arms, but not before he tragically discovers in his dying moments the wire in Yan's jacket and that his half-brother was an undercover cop.
Sam's Thai friend asks whether the Ngai case should be "closed", and interprets Sam's statement that he doesn't want to go too far as a tacit order to execute the entire family, including the women and children. Wong revealed to Sam that he has enough evidence to put Hau away for life and Sam should not have confronted him alone.
The pieces are set in place for the original film; Sam replaces Hau as the triad boss as Mary had wished and is now Wong's new foe; Ming is a police inspector, still working for Sam. And Yan is forced to remain as an undercover agent in Sam's gang. As the handover ceremony takes place, Sam is able to finally shed tears over the loss of his beloved Mary (from Wikipedia).
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Special thanks to my beloved wife for inspiring me to create this site, and helping me with its creation. Love you honey!!
**LEGAL DISCLAIMER** : All videos found on this site are not hosted by the owner or any staff of Asian Media Streams. All videos embedded to Anime Streaming World come from VIDEO SHARING websites such as Veoh, DailyMotion, Stage-6, Megavideo, Gofish, Youtube, and other video sharing websites. All images and other media are the sole property of their respective owners. In the case of copyrighted materials or other issues which we have violated, please contact the appropriate video sharing websites such as the ones mentioned above. Videos embedded on this Site are from other websites maintained by third parties over which Asian Media Streams and its staff are not in control