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Scientist Peyton Westlake (now played by Arnold Vosloo) has re-located to an abandoned building connected to an abandoned subway track, and continues to work on his synthetic skin, funding himself by stealing from gangsters. His synthetic skin still has a 99 minute timeframe before light cells cause it to break down, and he continues to search for a way to solve the problem.
Robert G. Durant, who appeared to die in the first film, managed to escape alive, and awakens from a coma. Durant and his men plot to break out a prison inmate named Alfred Hathaway and use his knowledge to build futuristic particle-beam weaponry in order to gain power in the criminal underworld of the city.
Westlake meets and befriends a scientist named David Brinkman (Jesse Collins), who is also working on a synthetic skin formula. Brinkman manages to break past the 99 minute photosensitivity reaction that causes Westlake's skin to break down in the light. However, after refusing an offer from Durant's men to buy his building (which they want for their particle-weapon scheme), Durant orders Brinkman killed. Durant's men tortureBrinkman before killing him. Westlake discovers his body, and upon observing Brinkman's body missing a finger (Durant's calling card), is able to deduce that Durant is alive and responsible for Brinkman's death.
A reporter named Jill Randall (Kim Delaney) discovers that Peyton Westlake is still alive while investigating Durant. She befriends Westlake but is later killed in a car bombing by Durant after showing a piece about him on television.
Westlake then learns that Durant is trying to again purchase Brinkman's building, this time from his sister Laurie (Renee O'Connor). He sets out to protect her from Durant. After she is captured, Westlake uses his synthetic skin to make masks and disguise himself as Durant's men. He infiltrates Durant's lair. In an ensuing battle, Durant's men, Dr. Hathaway, and a group of corrupt men who were intending to buy his particle weapons are all killed. Durant attempts to flee in his car, however, Westlake has equipped it with an explosive charge. Westlake taunts Durant then detonates the car, killing Durant once and for all and saving Laurie.
Westlake later sees a news report on Jill Randall's death, and decides to continue his journey to work on his synthetic skin and fight crime alone.