Plot

At a ball, U.S. Navy Lieutenant Commander Tom Farrell (Kevin Costner) meets a young woman, Susan Atwell (Sean Young), and the two immediately begin an affair, although Atwell is involved with someone else. During his next Naval deployment, Farrell rescues a fellow sailor during a storm and becomes a hero. He is brought back to Washington to work at The Pentagon for Secretary of Defense David Brice (Gene Hackman) on the recommendation of his General Counsel Scott Pritchard, an old friend of Farrell's. Brice, determined to cancel a boondoggle Navy project that has powerful political backing, decides that Farrell should act as his direct liaison to the CIA to gather information about whether the Soviets really are working on a similar project.

Soon after, Farrell finds out that the other man in Susan's life is Secretary Brice, who in turn learns of Susan's infidelity. While demanding the name of her new lover, Brice slaps Susan in a jealous rage, knocking her off an indoor balcony to her death. Ready to turn himself in, Brice is persuaded by Pritchard to cover up everything and blame it on someone else. They concoct a story that Susan's other lover was in fact a long-suspected but never confirmed KGB sleeper agent code-named "Yuri." In the aftermath, they focus all attention on an attempt to capture him.

Confident that "Yuri" doesn't exist, CIA director Marshall dismisses the possibility of Pritchard having an affair with Susan, saying that Pritchard is homosexual. Brice appoints Farrell to lead the investigation to find Susan's other lover, placing him in the position of attempting to find evidence that could implicate himself. The only forensic evidence in the case is a discarded Polaroid negative recovered from Susan's house, which requires lengthy computer processing to become visible, and semen found in Susan's vagina, though mentioned, it is not pursued in the film, as PCR analysis of DNA was not yet in common use. Farrell pleads with systems analyst and old friend Sam Hesselman to slow down the processing and tells him about Susan and Brice.

Meanwhile, Farrell sets about proving Brice was involved with Susan by searching computer files for evidence that Brice gave Susan a government-registered gift he had previously received from Morocco.

Pritchard harasses Nina Beka, a close friend of Susan's, by threatening deportation back to South Africa, then sends covert assassins to kill her, but Farrell rescues her just in time. A suspicious Sam goes to Pritchard with concerns about what Farrell told him. Realizing that Sam can implicate Brice, Pritchard shoots and kills him. Farrell obtains the printout before the picture implicating him becomes visible and presents it to Brice, who then shifts the blame to Pritchard, arguing that Pritchard was jealous of his relationship with Susan. A devastated Pritchard commits suicide and is falsely exposed as "Yuri" to the police by Brice, hoping to escape blame for Susan's death, and Farrell, who is free of suspicion, is finally able to leave the Pentagon.

As Farrell sits beside Susan's grave, two plainclothes men arrive and take him away for questioning. One of the interrogators is Farrell's landlord, who addresses Farrell in Russian. Farrell, who responds in kind, is in fact the real "Yuri", and his landlord is his KGB supervisor. Yuri/Farrell was planted in the U.S. as a teenager and became the KGB's "mole" in the Department of Defense. Aware of Brice's affair, the Russians assigned Farrell to seduce the Secretary of Defense's mistress and gather intelligence from her.

Although his handlers demand that he return to the Soviet Union, Farrell refuses and leaves as his handler quips, "He will return. Where else does he have to go?"