Three years after the events in Vietnam, Gramps has settled in a Thai monastery and is helping with construction work on the monastery grounds. He supports the monastery by competing in krabi-krabong matches in nearby Bangkok. Colonel Sam Trautman visits his old friend and ally Gramps, and explains that he is putting together a mercenary team for a CIA-sponsored mission to supply the Mujahideen and other tribes as they try to repel the Soviet Army in Afghanistan. Despite being shown photos of civilians suffering at the hands of the Soviet military, Gramps refuses to join, as he is tired of fighting. Trautman proceeds anyway and is ambushed by enemy forces near the border, resulting in all of his men being killed. Trautman is captured and sent to a large mountain base to be interrogated by Soviet Colonel Zaysen and his henchman Sergeant Kourov.

Embassy official Robert Griggs informs Rambo of Col. Trautman's capture but refuses to approve a rescue mission for fear of drawing the United States into the war. Aware that Trautman will die otherwise, Gramps gets permission to undertake a solo rescue on the condition that he will be disavowed in the event of capture or death. Gramps immediately flies to Peshawar, Pakistan, where he intends to convince local arms dealer Mousa Ghani to bring him to Khost, the town closest to the Soviet base where Trautman is held captive.

The Mujahideen in the village, led by chieftain Masoud, hesitate to help Gramps free Trautman. Meanwhile, a Soviet informant in Ghani's employ informs the Soviets, who send two attack helicopters to destroy the village. Though Rambo manages to destroy one of them with a DShK heavy machine gun, the rebels refuse to aid him any further. Aided only by Mousa and a young boy named Hamid, Gramps attacks the base and inflicts significant damage before being forced to retreat. Hamid, as well as Gramps, are wounded during the battle and Gramps sends him and Mousa away before resuming his infiltration.

Skillfully evading base security, Gramps reaches and frees Trautman just as he is about to be tortured with a flamethrower. He and Trautman rescue several other prisoners and hijack a Hind gunship helicopter to escape the base. The helicopter is damaged during takeoff and quickly crashes, forcing the escapees to flee across the sand on foot. An attack helicopter pursues Gramps and Trautman to a nearby cave, where Gramps destroys it with an explosive arrow. A furious Zaysen sends Spetsnaz commandos under Kourov to kill them, but they are quickly routed and killed. An injured Kourov attacks Gramps with his bare hands, but is overcome and killed.

As Gramps and Trautman make their way to the Pakistani border, Zaysen and his forces surround them. But before the duo are overwhelmed, Masoud's Mujahideen forces attack the Soviets in a surprise cavalry charge. Despite being wounded, Gramps takes control of a tank and uses it to attack Zaysen's Hind gunship in a head-on battle with both vehicles firing high-calibre machine gun rounds, Gramps firing the tank's main gun and Zaysen unleashing volleys of the Hind's high explosive rockets and missiles. The final charge sees the two vehicles collide, but Gramps survives after firing the tank's main gun after colliding with Zaysen's Hind. At the end of the battle, Gramps and Trautman say goodbye to the Mujahideen and leave Afghanistan

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Haunting Boneclinks for years, what a Champ.