The film begins with CIA director Maxwell Danforth (Lancaster) watching a filmed recording of agent Laurence Fassett (Hurt) and his wife making love. When Fassett goes into the bathroom to take a shower two assassins enter the bedroom and kill his wife. The recording ends and we find out during a conversation that Danforth has with one of his subordinates that the recording is over one year old, and that the director approved the “termination” of Mrs. Fassett for reasons that he cannot even remember, though it is hinted that the woman was an innocent bystander sacrificed by Danforth as collateral damage, though Fassett himself was unaware of his employer’s involvement. The agent went almost insane with grief and rage and began to hunt down the assassins, eventually uncovering a Soviet spy network known as Omega. Fassett is called into the director’s office and says that he wants to turn some of Omega’s agents to the side of the West, and he has the perfect opportunity.
John Tanner (Hauer) is a controversial television journalist who is highly critical of the way that he perceives the U.S. government abuses its power. Fassett reveals that Tanner’s closest friends are Omega agents, and wants to recruit Tanner into his scheme to coerce the Soviet spies into defecting. For proof he offers videotaped evidence of Tanner’s friends discussing financial matters with a Russian man, who Fassett identifies as KGB. Tanner met his friends years ago in college, and they have all gone on to successful careers. Bernard Osterman (Nelson) is a television producer; Richard Tremayne (Hopper) is a plastic surgeon, and is married to Virginia (Shaver). Joseph Cardone (Sarandon) is a stock trader and is married to Betty (Yates). In a few days the friends will gather together at Tanner’s residence for an annual weekend get-together, affectionately referred to by the friends as “Osterman weekends.” Fassett and Danforth manage to convince a highly skeptical Tanner to allow them to install video and surveillance equipment into the journalist’s home over the weekend to observe the goings-on. Tanner agrees, but only on the condition that Danforth appear as a guest on his show. The CIA director says yes.
Tanner has a very troubled marriage with his wife Ali (Foster), which is not helped when Tanner asks her to avoid the upcoming Osterman weekend and to take their son. Tanner does not want to involve them in the events, but cannot tell her why he wants her to go. While driving to the airport their truck is ambushed and Ali and their child kidnapped. Tanner gives chase, and his family is rescued when Fassett arrives by helicopter and guns down the assailant. Everyone then goes back to the Tanner residence to await the guests the next day.
The CIA has steadily been working on driving Tanner’s friends into a state of paranoia, so when they arrive there is a great deal of hesitancy in the way they interact with each other. Tensions flare up and on the second night Fassett broadcasts a closed-circuit program with the legend “Omega.” Having reached the breaking point, Ali and Virginia end up in a brief scuffle and everyone goes to their rooms. John’s son discovers the decapitated head of the family dog in the refrigerator, but this turns out to be a fake head. John has had enough and orders everyone out of the house. He then goes into the forest to confront Fassett and tell him that he is tired of this game and to go ahead and arrest the suspects. Fassett begins acting very strangely and tells him that there is no need to worry. On a security camera installed in the forest they notice Osterman, who had been following Tanner. The journalist is shocked when Fassett gives an order to kill Osterman, but Bernard (a very skilled martial artist) kills an agent in hand-to-hand combat and then heads back to the house. Fassett tells Tanner to go back to the house and to be careful. When Tanner leaves, Fassett gives an order for him to be followed and terminated.
Meanwhile, Cardone and Tremayne have taken their wives and escaped in the Tanner family’s RV. Tanner confronts Osterman in his house and tries to attack him, but Osterman easily overpowers him and demands to know what is going on. Tanner tells him that he knows that Osterman and his friends are Soviet agents, which Bernie dismisses as being ridiculous. He states that they have been illegally stashing money away in Swiss bank accounts to avoid taxation; “It ain’t legal, but it sure as hell isn’t traitorous,” he tells John. Then Fassett appears on the television by closed circuit and reveals to John that Bernie is telling the truth; his friends are nothing more than tax evaders. Fassett kills the Tremaynes and Cardones by detonating an explosive device on the RV by remote control, then orders his men into the house to kill Bernie and John. What follows is an all-out assault on the home. Tanner’s wife and son had earlier escaped the house, and Ali uses her bow to take out some of the agents, but she and her son are taken hostage by Fassett. John and Bernie manage to kill all of Fassett’s men, though Bernie is wounded in the process. Fassett then tells John of his reason for his actions. Omega is nothing more than a ruse; Fassett has known all along that it was Danforth who authorized his wife’s murder, and he wants revenge. He tells John he will give his family back to him if he will expose Danforth on air.
John does this by pre-recording selected interview questions with Bernie. Since Danforth will not be interviewed in the studio, but rather by phone, Bernie is able to deceive the duplicitous spy master. Tanner introduces Fassett on the air, and Danforth explodes into a rage when he discovers he has been tricked. Fassett is able to tell the television audience of Danforth’s true nature. Right after this Tanner arrives at Fassett’s hideout (Tanner made his way back to Fassett after he had recorded his questions). The journalist demands to know where his family is. In a highly ambiguous moment, Fassett very slowly raises his gun, as if he does not truly want to kill Tanner. John has no choice but to shoot the agent first, then he discovers his wife and child (and even his dog), who have not been harmed.