A Puerto Rican former convict named Carlito Brigante is released from prison on a technicality after serving five years of a thirty-year sentence. Vowing to go straight and retire to a quiet life away from his past in the New York City underworld, Carlito dreams of earning enough money to move to the Bahamas and purchase a car rental business. His loyal attorney and friend, David Kleinfeld, who fought for his release, exhibits shady behavior that hints at his own descent into the criminal world. Carlito tentatively navigates his reentry into society, taking a management job at a nightclub owned by a local mobster, while steering clear of the temptations and dangers of his former life of crime.

Despite his efforts to maintain a straight path, Carlito's past associations and loyalties are hard to shake off. He rekindles a romance with his former love, Gail, a dancer who aspires to be an actress. Their relationship reawakens his desire for a peaceful life away from crime. Meanwhile, he is constantly pulled back into the fray by friends and foes who have not forgotten his former status as a top player in the city's criminal hierarchy. His attempts to stay clean are continually challenged by the environment around him, filled with violence, betrayal, and the seductive lure of easy money. As Carlito struggles to keep his promise of change, he finds that escaping his old life is more difficult than he ever imagined.