Three years after the events of the first movie, Noa Izumi and Asuma Shinohara are now testing new Labors at a facility run by the Metropolitan Police. Isao Ota is a police academy Labor instructor. Mikiyasu Shinshi has since been reassigned as the Tokyo Metropolitan Police's head of General Affairs. Seitaro Sakaki has retired with Shigeo Shiba taking over his position as head of the labor maintenance team with Hiromi Yamazaki, Kiichi Goto and Shinobu Nagumo remaining with the unit as Kanuka Clancy had permanently returned to New York. Most of them had been replaced by fresh labor pilots.
Suspicious events begin to materialize with the face of a military takeover of Tokyo by GSDFforces and martial law after the Yokohama Bay Bridge is destroyed by a missile, with belief that the JASDF was the culprit. Protests in various JSDF bases take place as a means of conveying their denial of the bridge attack. Before long, public panic comes as JGSDF-marked gunships attack in several bridges in Tokyo Bay, various communication centers and SV2 headquarters, coupled by the release of a supposed deadly gas after Special Assault Teamsnipers shoot down an auto-piloted blimp that was responsible for jamming all electronics in the Greater Tokyo Area.
Goto and Nagumo once more assemble the original Section 2 members in an abandoned subway passage as they embark on a secret operation to apprehend Yukihito Tsuge, a former GSDF officer who planned the terrorist attacks as revenge for the failure of a UN peacekeeping operation in Cambodia back in 1999. With the threat of USintervention looming unless the government controls the situation, the team uses an old stretch of the Ginza Line to approach an artificial island Tsuge uses as his hideout. Goto also takes care of things on his end by facilitating the arrest of Shigeki Arakawa, a GSDF intelligence agent who is actually one of Tsuge's cohorts. After a fierce fight inside the artificial island's tunnel which results in flooding, the team evacuates the tunnel while Nagumo breaks through to finally arrest Tsuge.