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In 2029, Earth has been ravaged by the war between the malevolent artificial intelligence Skynet and the human resistance. Skynet sends the T-1000—an advanced, prototype, shape-shifting Terminator made of virtually indestructible liquid metal—back in time to kill the resistance leader John Connor when he is a child. To protect Connor, the resistance sends back a reprogrammed T-800 Terminator, a less-advanced metal endoskeleton covered in synthetic flesh.

In 1995 Los Angeles, John's mother Sarah has been incarcerated at the Pescadero State Hospital for her violent efforts to prevent "Judgment Day"—the prophesied events of August 29, 1997, when Skynet will gain sentience and, in response to its creators' attempts to deactivate it, incite a nuclear holocaust. John, taken in by foster parents, considers Sarah's beliefs to be delusional and resents her efforts to prepare him for his future role. The T-1000 locates John in a shopping mall, but the T-800 intervenes, coming to John's aid and enabling their joint escape. John calls to warn his foster parents, but the T-800 deduces the T-1000 has already killed them. Realizing the T-800 is programmed to obey him, John forbids it from killing people and orders it to save Sarah from the T-1000.

The T-800 and John intercept Sarah during an escape attempt but Sarah flees in horror because the T-800 resembles the Terminator that was sent to kill her in 1984. John and the T-800 persuade her to join them, and they escape the pursuing T-1000. Although distrustful of the T-800, Sarah uses its knowledge of the future to learn that a revolutionary microprocessor, being developed by Cyberdyne Systems engineer Miles Dyson, will be crucial to Skynet's creation. Over the course of their journey, Sarah sees the T-800 serving as a friend and father figure to John, who teaches it catchphrases and hand signs while encouraging it to become more human-like.

Sarah plans to escape to Mexico with John, but a nightmare about Judgment Day convinces her to kill Dyson. She attacks Dyson in his home, but realizes she cannot kill a person and relents. John arrives and reconciles with Sarah while the T-800 convinces Dyson of the future consequences of his work. Dyson reveals his research has been reverse engineered from the damaged CPU and severed arm of the 1984 Terminator. Believing his work must be destroyed, Dyson, Sarah, John, and the T-800 break into Cyberdyne, retrieve the CPU and the arm, and set explosives to destroy the lab. The police assault the building and fatally shoot Dyson, but he detonates the explosives as he dies. The T-1000 pursues the surviving trio, cornering them in a steel mill.

Sarah and John split up to escape while the T-1000 mangles the T-800 and briefly deactivates it by destroying its power source. The T-1000 assumes Sarah's appearance to lure out John but Sarah intervenes and, along with the reactivated T-800, pushes it into a vat of molten steel, where it disintegrates. The T-800 explains it must also be destroyed to prevent it from serving as a foundation for Skynet. Despite John's tearful protests, the T-800 persuades him its destruction is the only way to protect their future. Sarah shakes the T-800's hand and, having come to respect it, helps lower it into the vat. Before its destruction, the T-800 gives John a thumbs-up. As Sarah drives down a highway with John, she reflects on her renewed hope for an unknown future, musing if the T-800 could learn the value of life, so can humanity.