Ellen Ripley (Sigourney Weaver), the only survivor of the space freighter Nostromo, is rescued and revived after drifting for fifty-seven years in hypersleep. At an interview before a panel of executives from her employer, the Weyland-Yutani Corporation, her testimony regarding the Alien is met with extreme skepticism as no physical evidence of the creature survived the destruction of the Nostromo. Ripley loses her space flight license as a result of her "questionable judgment" and learns that LV-426, the planet where her crew first encountered the Alien eggs, is now home to a terraforming colony. Some time later, Ripley is visited by Weyland-Yutani representative Carter Burke (Paul Reiser) and Lieutenant Gorman (William Hope) of the Colonial Marines, who inform her that contact has been lost with the colony on LV-426. The company decides to dispatch Burke and a unit of marines to investigate, and offers to restore Ripley's flight status and pick up her contract if she will accompany them as a consultant. Traumatized by her previous encounter with the Alien, Ripley initially refuses to join, but accepts when she realizes that the mission will allow her to face her fears, which had been plaguing her since her first encounter. Aboard the warship Sulaco she is introduced to the Colonial Marines, including Sergeant Apone (Al Matthews), Corporal Hicks (Michael Biehn), Privates Vasquez (Jenette Goldstein) and Hudson (Bill Paxton), and the android Bishop (Lance Henriksen), toward whom Ripley is initially hostile due to her previous experience with the android Ash aboard the Nostromo.
The heavily-armed expedition descends to the surface of LV-426 via dropship, where they find the colony seemingly abandoned. Two living Alien facehuggers are found in containment tanks in the medical lab, and the only colonist found is a traumatized young girl nicknamed Newt (Carrie Henn). The marines determine that the colonists are clustered in the nuclear-powered atmosphere processing station. There they find a large Alien nest filled with the cocooned colonists. The Aliens attack and kill most of the unit, but Ripley rescues Hicks, Vasquez, and Hudson. With Gorman knocked unconscious during the rescue, Hicks assumes command and orders the dropship to recover the survivors, intending to return to the Sulaco and destroy the colony from orbit. However, a stowaway Alien kills the dropship pilots in flight, causing the vessel to crash into the processing station; subsequently, the surviving humans barricade themselves inside the colony complex.
Ripley discovers that it was Burke who ordered the colonists to investigate the derelict spaceship where the Nostromo crew first encountered the Alien eggs, and that he hopes to return Alien specimens to the company laboratories where he can profit from their use as biological weapons. She threatens to expose him, but Bishop soon informs the group of a greater threat: the damaged processing station has become unstable and will soon detonate with the force of a thermonuclear weapon. He volunteers to use the colony's transmitter to pilot the Sulaco's remaining dropship to the surface by remote control so that the group can escape. Ripley and Newt fall asleep in the medical laboratory, awakening to find themselves locked in the room with the two facehuggers, which have been released from their tanks. Ripley is able to alert the marines, who rescue them and kill the creatures. Ripley accuses Burke of attempting to smuggle implanted Alien embryos past Earth's quarantine inside her and Newt, and of planning to kill the rest of the marines in hypersleep during the return trip. The electricity is suddenly cut off and numerous Aliens attack through the ceiling; Hudson, Burke, Gorman, and Vasquez are killed and Newt is captured by the Aliens.
Ripley and an injured Hicks reach Bishop and the second dropship, but Ripley is unwilling to leave Newt behind. She rescues Newt from the hive in the processing station, where the two encounter the Alien queen and her egg chamber. Ripley destroys most of the eggs, enraging the queen, who escapes by tearing free from her ovipositor. Closely pursued by the queen, Ripley and Newt rendezvous with Bishop and Hicks on the dropship and escape moments before the colony is consumed by the nuclear blast. Back on the Sulaco, Ripley and Bishop's relief at their narrow escape is interrupted when the Alien queen, stowed away on the dropship's landing gear, impales Bishop and tears him in half. Ripley battles the queen using an exosuit cargo-loader. The two of them tumble into a large airlock, which Ripley then opens, expelling the queen into space. Ripley clambers to safety and she, Newt, Hicks and the still-functioning Bishop enter hypersleep for the return to Earth.