During the 1930s, a New York City illegal gambling house owner and his associates must deal with strong competition, gangsters, and corrupt cops in order to stay in business.
"Sugar" Ray is the owner of an illegal casino, who contends with the pressures of vicious gangsters and corrupt policemen who want to see him go out of business. In the world of organized crime and police corruption in the 1930s, any dastardly trick is fair.
In 1918 Harlem, New York City, African-American "Sugar Ray" Raymond (Richard Pryor) plays craps in a backroom at his saloon. A young boy (Dezi Arnez Hines II) delivers cigarettes to the club owner just as a toothless gambler "craps out" in a dice game and threatens to stab everyone in the room. The errand boy surprises Sugar Ray by shooting the toothless gambler in the head. Learning that the boy is an orphan, Ray offers to take him in.
Twenty years later in the year 1938, Ray's establishment has grown into the thriving Club Sugar Ray's. The former errand boy, now known as "Quick," (Eddie Murphy) has become Ray's right-hand man and de facto son. One night, a gangster named Tommy Smalls (Tommy Ford) arrives at the club with a beautiful Creole woman named Dominique La Rue (Jasmine Guy). Ray recognizes Smalls as the manager of the rival Pitty Pat Club, run by white gangster Bugsy Calhoune (Michael Lerner). Ray notices Quick admiring Dominique from afar, and warns him that she is Calhoune's mistress. Baffled that such a beautiful woman would be involved with a fat, ugly gangster like Calhoune, Quick introduces himself to the woman as a suspicious Ray offers Smalls one of his best tables.
Later, Calhoune learns that business is down at the Pitty Pat Club, while Ray's business, according to Dominique and Smalls, is pulling in an estimated $10-15 thousand per week. Hoping to get rid of Ray's club, Calhoune enlists Sergeant Phil Cantone (Danny Aiello), a corrupt policeman, to pay Ray a visit.
Counting their profits at the end of the night, Ray's staff awaits Vera Walker (Della Reese), the overweight madam who runs the club's brothel. Vera delivers only $200, and Quick accuses her of stealing. Vera challenges Quick to a fistfight and he laughingly obliges. Following her outside, Quick is humiliated when Vera overpowers him. He retaliates by hitting her with a trash can lid, and she pulls a straight razor. Quick draws his gun and shoots Vera's pinkie toe. As the madam is carried away in an ambulance, Ray urges his protégé to stop overreacting.
That night, Ray finds Sgt. Cantone in his living room, but, when pressed, denies that he owns Club Sugar Ray's, insisting he operates a candy shop. Assuming that Calhoune sent the policeman, Ray warns Quick that they will have to relocate if the gangster wants to run them out of business, but Quick resists the idea. Later, Quick shows Ray a telegram from Dominique, who has invited him to dinner, and insists she is romantically interested in him. Ray remains suspicious of Calhoune's crew, however, and is vindicated when Sgt. Cantone arrives and admits his association with the mobster. Cantone threatens that if Ray does not pay him $10,000 per week, he will shut down the club. Ray asks for time to think about the offer.
After Cantone leaves, Ray develops a plan to rob Calhoune, take vengeance against Cantone, and leave town. The scheme involves robbing Calhoune's "pick-up man" on the night of an upcoming boxing match between African-American fighter, Jack "Champ" Jenkins, and Michael Kirkpatrick, an inferior white boxer whose odds are very low. Ray also plans to bet $200,000 on Kirkpatrick in order to deceive Calhoune into thinking Jenkins will throw the fight, leading him to bet on Kirkpatrick and shift the odds. Later, Sgt. Cantone ambushes Tommy Smalls at his apartment, accuses him of stealing from Calhoune, and kills him.
Shortly after, Quick pays Smalls a visit to find out more about Calhoune, but finds the gangster dead. As he leaves the building, he is spotted by a group of Smalls's cohorts. Arriving at a restaurant to meet Dominique, Quick is surprised to find Calhoune and his assistant, Joe Leoni, at their table. Calhoune asks Quick to work for him, but Quick refuses, and leaves the restaurant. He is followed by Smalls's cohorts, who believe him to be Smalls's killer. Quick runs the men off the road, then dives out of his moving car and through a shop window. His pursuers fire several rounds of ammunition at him, but Quick shoots all three of them dead. When he returns to Ray's club, Quick receives a call from Dominique and goes to her house, where she seduces him, and encourages him to reveal his real name, Vernest Brown. After they make love, Dominique attempts to kill him, but Quick outwits her and shoots her dead.
Quick takes refuge at Ray's home and recounts the night's events. Ray tells Quick that Calhoune will try to assassinate him again, once he learns of Dominique's death. Quick agrees to hide out until their heist the following night. Shortly after, Sgt. Cantone raids Ray's club and Calhoune's men burn it down. Meanwhile, Vera's best prostitute, Sunshine, seduces Calhoune's pick-up man, Richie Vento (Vic Polizos), and confesses that she is a pick-up girl for a local numbers racket. She convinces Vento to give her a ride during the boxing match, just after he is scheduled to pick up the cash amassed by Calhoune's bookkeepers. As planned, Vento makes the pickup while the fight is in progress, then picks up Sunshine on a street corner.
At the same time, a couple of Ray's employees retaliate against Calhoune by blowing up the Pitty Pat Club. Cantone spies on Vento as he throws Sunshine's bag of "cash" in the trunk next to his, then witnesses as Vento gets into an automobile accident with Ray's nearly-blind croupier, Bennie Wilson (Redd Foxx), and Vera. Dressed as policemen, Ray and Quick intervene, identifying Sunshine as "Lady Heroin," a notorious drug dealer. They arrest Sunshine and Vento, and seize the bag of money from Vento's trunk, claiming it is Sunshine's bag of heroin, as two white policemen arrive on the scene. Vento tells the white officers he knows Sgt. Cantone, and they release him, taking the bag from Ray. Cantone follows Ray and Quick to a deserted bank building and teases them about their failed plan to steal from Calhoune. Just as he points his gun at the two, the rest of Ray's crew appears, holding the corrupt policeman at gunpoint. Tying Sgt. Cantone to a chair, they leave him to suffocate in the vault.
At the same time, Vento delivers the money to Calhoune, but instead discovers Sunshine's "heroin" inside the bag. Calhoune tests the powder and angrily announces it is sugar. Vera shows up, promising she had nothing to do with Ray's scheme, and begs for protection. She reveals that Ray and Quick are back at Ray's house, and Calhoune goes there with his men. Inside, they find Sgt. Cantone's badge and realize they have been set up just as the place explodes.
At a motel in Hoboken, New Jersey, Ray and Quick pay the white men who posed as policemen, and gaze at the New York skyline one last time before leaving town with Annie, Vera, Bennie, and Calhoune's bag of cash.
