The film opens with a waste management firm in upstate NY trying to illegally dispose of toxic waste. Chemicals are loaded on three trucks bound for New Jersey. Meanwhile, a crew of diamond thieves steal a shipment of stones and a black Cadillac Seville. The thieves are pursued by NYPD and elude capture by heading to the Holland Tunnel (known in the film as the "Tunnel to New Jersey"). As the thieves enter the tunnel, the trucks loaded with toxic waste make their way into the tunnel as well. The thieves push their way past the traffic entering the tunnel, causing chaos as they make their way through the north tube. As they weave and shove their way past traffic, the diamonds spill all over the floor of the car. As one of the thieves reaches down to get the diamonds, she pushes the gas pedal to the floor. The Cadillac accelerates wildly, and the driver loses control. The car hits the tunnel wall, and goes airborne, smashing into a booth which houses Port Authority police officers who patrol the tunnel, and smashes into one of the trucks carrying toxic waste. The truck explodes, setting off a chain reaction explosion that destroys the other two trucks. The destruction of the trucks and their cargo creates a devastating explosion that causes the roof of the tunnel to cave in. Cars on the New Jersey end are flattened. Another explosion takes place, and the fire, fueled by the remaining oxygen in the tube, explodes into a fireball, rushing through the tunnel at hellish speed. The fireball devours everything in its path.

On the Manhattan end of the tunnel, former New York City Emergency Management Chief, Kit Latura (Sylvester Stallone) is preparing to drive into the tunnel when the entrance suddenly explodes. The entrance caves in, blocking the tunnel. He then races into action, trying to help whoever he can. He runs into an old EMS colleague who tells him that the tunnel is severely damaged.

Latura then checks with tunnel administrators, and finds that the hidden passages have all been sealed off. The only escape route, the Mid River Passage, a service tunnel running between the north and south tubes, has been so severely damaged in the blast that it is virtually impossible to use as an escape route. With the tube weakened, the structure could come down if any wrong moves are made. Roy Nord (Viggo Mortensen), one of the survivors in the tunnel, believes he can find a way out through the mid-river passage. Latura makes his way into the tunnel through the tunnel's ventilation fans. He learns that Nord has entered the mid-river passage and goes after him; he finds Nord and warns him that the passage could come down at any moment, but Nord dismisses the possibility. Latura runs out as the mid-river collapses, killing Nord. Latura barely escapes and a small explosion kills one of the survivors.

Water begins seeping in from the river and Latura uses an explosive to stop the leak. Soon afterward George Tyrell (Stan Shaw), a police officer in the tunnel, returns from investigating the Manhattan end and is crushed by a truck as it comes over the broken road. Latura and the survivors manage to free him from beneath the truck but he is left with a broken neck. Water begins seeping in again and angry survivors confront Latura about the situation. He claims he can slow it down but nothing can stop the pressure from the clean-up effort on the Manhattan side of the tunnel, which is causing the water to come enter their side. He asks George if there are any booths which may have a way to dry area; George mentions booth 3 and Latura swims under it and finds a dry storage area. He returns to tell the survivors of his discovery and they head to the booth. George can not go, however, because of his broken neck. He gives Latura a bracelet to give to Grace (Vanessa Bell Calloway), his girlfriend, and tells him to "take them to daylight", a reference to the survivors. After the survivors reach the dry ground, Eleanor (Claire Bloom), one of the elder survivors, realizes her dog is missing and soon dies, presumably from shock and/or hypothermia. Water starts to come in and Latura discovers another room behind a wall. He manages to pull part of the wall out and this leads to another storage room, in which he uses a glow stick to light up the area. Water comes in here as well and Latura and the survivors run up a wooden staircase. Latura notices the dog swimming to the staircase and goes to rescue it. He successfully saves the dog, but accidentally falls into the water along with half of the staircase. This isolates him from the survivors. One of them, Madelyne (Amy Brenneman), tries to help him up but falls as well. Another survivor notices a way out through the stairways end and the other survivors leave just before most of the area above the stairway collapses.

Madelyne and Latura then swim around looking for a possible way out. Latura realizes he will have to do a blow out, in which an explosion would blow the tunnel roof open in a geyser-like explosion, forcing water out through the river bed. At this point there appears to be a romantic connection between the two. Latura lights fuses and swims to a safety point to the tunnel road. The fuses go off and the tunnel appears to collapse; Latura emerges from the mud and he and Madelyne are seen blowing in opposite directions as the water blows through the river bed. The water can be seen bubbling on the surface of the river and Madelyne appears and finds Latura. He appears to be heavily exhausted but otherwise okay. They are discovered by boats on the river and taken to EMS workers. Latura hands Grace the bracelet. He then asks Madelyne if she wants to ride with him and she jokingly says she probably has no other choice. Latura replies, "On one condition, we gotta take the bridge."