In 1972, Mason Skiles is a U.S. diplomat in Lebanon living in Beirut with his Lebanese wife, Nadia. They have recently begun caring for Karim, a 13-year-old Palestinian boy who claims he is without a family. While hosting a party, Skiles is confronted by his friend, CIA agent Cal Riley, who wishes to question Karim, whose brother Rafid Abu Rajal has been linked to the 1972 Munich massacre. The party is attacked by Karim's brother, Rafid, who abducts Karim; in the ensuing gunfight, Nadia is killed.

Ten years later, Skiles has become an alcoholic and is working as a self-employed labor arbitrator in New England. While arbitrating a labor issue between particularly intransigent parties and struggling to keep his small firm afloat, he is approached by Sully, an old client, on behalf of the U.S. government. Sully discloses that Skiles has been requested for an academic lecture in Lebanon, and hands him money, a plane ticket, and a passport. Skiles is initially resistant but decides to travel to Beirut.

He meets several government officials, including CIA agent Donald Gaines, CIA agent Sandy Crowder, Colonel Gary Ruzak of the NSA, and Ambassador Frank Whalen, and learns that Cal Riley was recently abducted in Lebanon. The kidnappers have specifically requested Skiles as the negotiator.

The group meets with the kidnappers and find Karim heading the organization. Karim demands the release of his brother in exchange for Riley, despite the Americans' protest that they do not have Rafid in captivity. Skiles suspects that Israel is holding Rafid, and travels with Ruzak to secure his release. The Israelis reveal that they do not have Rafid, and Skiles returns to Beirut to meet with Alice, Riley's wife. Alice holds Skiles responsible for Riley's abduction, believing that Riley has remained in Lebanon over the guilt he feels for Nadia's death.

The next day, while Skiles is conducting the lecture at the American University of Beirut (the official reason for his visit), a car bomb is set off outside the building. In the ensuing chaos, Skiles is instructed to leave to meet Karim. Karim brings him to Riley, who covertly tells Skiles that the Palestine Liberation Organization (PLO) is holding Rafid and that Gaines is not to be trusted. Before releasing Skiles, Karim threatens that unless Rafid is returned later that night, he will sell Riley to Iran.

Skiles returns to Riley's apartment to search for clues, where he encounters Crowder. She reveals that Gaines had been stealing money from the embassy and that Riley had been preparing to make a report shortly before his disappearance. Skiles convinces Crowder that the PLO is holding Rafid, and she steals $4 million from the CIA office to trade for Rafid.

Crowder and Skiles lead an attack on a PLO officer in order to force a trade for Rafid. After a payoff to his PLO captors, they bring him to the exchange with Karim. After trading Riley for Rafid, Rafid is shot and killed by a Mossad sniper in a nearby building. The Americans successfully escape. The Mossad sniper is actually Bernard who originally met Skiles when he arrived to Beirut.

Bernard meets Sandrine, the mistress of the PLO officer whom Skiles attacked, who is also an Israeli agent, and leaves on a helicopter. Before departing Beirut, Skiles learns that Gaines has unexpectedly retired and that Ruzak has left Beirut. Crowder announces her intention to apply for the newly vacant station chief job, and Skiles offers his services as a negotiator.

As the film ends, news footage is shown of the subsequent Israeli invasion of Lebanon, increasing international involvement in the country, and, finally, the bombings of the U.S. Embassy and the U.S. Marine Corps' barracks in Beirut in 1983.