The game begins with Marcus Reed assuming control of his father's criminal empire after he is arrested. A few years later, he is betrayed by a friend, and both he and his father are almost killed during a Christmas night celebration. He survives with the aid of NYPD detective Terry Higgins. Higgins is a close friend of Reed's father and offers to cover up Reed's criminal activity, calling it his "last chance" before he's given to the NYPD.

Five years later, Reed is an NYPD officer himself, working under the mentorship of Higgins. One of Higgins' contacts calls and asks for a meeting. At the contact point, an old warehouse, a bomb goes off with Higgins inside. Back at the precinct, Reed is contacted by FBI agent Gabriel Whitting, who informs Reed that one of the detectives in his precinct is a mole, and is probably responsible for Higgins' death. Whitting does not know who the mole is; only that he is connected to four major crime families in the city. Whitting asks Reed to investigate these families and try to find the mole, which takes up a majority of the storyline along with several minor subplots.

Towards the end of the game, an officer named Victor Navarro is identified as the mole. At this point, the game has two possible endings, based on the player's badge rating and ultimate status as a Good Cop or a Bad Cop.

In the bad ending, Navarro escapes the officers leading him away, grabs a gun, and kills Whitting. He then boards a subway train, with Reed in pursuit. Ultimately, Reed throws Navarro off the train, killing him. Later, while Reed is sitting alone in the train station, Higgins sits next to him. Higgins had faked his own death and framed Navarro to escape being arrested by Whitting. Higgins hands Reed a bag of cash and asks him to join him in Mexico. Reed, however, is angry at having been used, so he kills Higgins.

In the good ending, Navarro is taken away without incident. Later, Reed is approached by Higgins with the same offer of comfortable living in Mexico as in the bad ending, but Reed simply refuses. Higgins then threatens to expose Reed's past, but Reed responds that he would pay for his crimes with honor, and orders Higgins to come quietly. Higgins run onto a subway train, with Reed in pursuit. Ultimately, Higgins is killed when the train derails. Back at the train station, Whitting promises to talk to the DA about Reed's father as thanks for catching the mole.