Kevin Flynn is a leading software engineer formerly employed by the computer corporation ENCOM, who now runs a video arcade and attempts to hack into ENCOM's mainframe system. However, ENCOM's Master Control Program (MCP) halts his progress. Within ENCOM, programmer Alan Bradley and his girlfriend, engineer Lora Baines, discover that the MCP has closed off their access to projects. When Alan confronts the senior executive vice president, Ed Dillinger, Dillinger claims that the security measures are an effort to stop outside hacking attempts. However, when Dillinger privately questions the MCP, he discovers the MCP has expanded into a powerful virtual intelligence and has become power-hungry, illegally appropriating personal, business, and government programs to increase its own capabilities. The MCP blackmails Dillinger with information about his plagiarizing Flynn's games if he does not comply with its directives.
Lora deduces that Flynn is the hacker, and she and Alan go to his arcade to warn him. Flynn reveals that he has been trying to locate evidence proving Dillinger's plagiarism, which launched Dillinger's rise in the company. Together, the three form a plan to break into ENCOM and unlock Alan's "Tron" program, a self-governing security measure designed to protect the system and counter the functions of the MCP. Once inside ENCOM, the three split up and Flynn comes into direct conflict with the MCP, communicating with his terminal. Before Flynn can get the information he needs to reveal Dillinger's acts, the MCP uses an experimental laser to digitize and download Flynn into the ENCOM mainframe cyberspace, where programs are living entities appearing in the likeness of the human "Users" (programmers) who created them.
Flynn learns that the MCP and its second-in-command, Sark, rule and coerce programs to renounce their belief in the Users. The MCP forces programs that resist to play in deadly games and begins pitting Flynn in duels. Flynn meets other captured programs, Ram and Tron, between matches. Partnered, the three escape into the mainframe during a light cycle match, but Flynn and Ram become separated from Tron by an MCP pursuit party. While attempting to help Ram, who was wounded in the pursuit, Flynn learns that he can manipulate portions of the mainframe by accessing his programmer knowledge. Ram recognizes Flynn as a User and encourages him to find Tron and free the system before "derezzing" (dying). Using his new ability, Flynn rebuilds a vehicle and disguises himself as one of Sark's soldiers.
Tron enlists help from Yori, a sympathetic program, and at an I/O tower receives from Alan information necessary to destroy the MCP. Flynn rejoins them, and the three board a hijacked solar sailer to reach the MCP's core. However, Sark's command ship destroys the sailer, capturing Flynn and Yori and presumably killing Tron. Sark leaves the command ship and orders its deresolution, but Flynn keeps it intact by again manipulating the mainframe, while Sark reaches the MCP's core on a shuttle carrying captured programs. While the MCP attempts to absorb captive programs, Tron, who turns out to have survived, confronts Sark and critically injures him, prompting the MCP to give him all its functions. Realizing that his ability to manipulate the mainframe might give Tron an opening, Flynn leaps into the beam of the MCP, distracting it. Seeing the break in the MCP's shield, Tron attacks through the gap and destroys the MCP and Sark, ending the MCP's control over the mainframe and allowing the captured programs to communicate with users again.
