The film begins immediately following the events of Alien vs. Predator, aboard a Predator spaceship which is leaving Earth carrying dead Aliens, living facehuggers, and the body of the Predator that defeated the Alien queen. A chestburster erupts from the dead Predator's body; it is a new creature that is a hybrid of Alien and Predator characteristics (referred to by the production team as the "Predalien"). It quickly matures into an adult and begins killing Predators throughout the ship. A Predator's weapons fire punctures the hull and the ship crashes in the forest outside of Gunnison, Colorado.
With the Predators dead, the Predalien and several facehuggers escape, implanting embryos into a nearby father and son and into several homeless people living in the sewers. A distress signal from the wrecked ship reaches the Predator home world and a lone Predator responds, traveling to Earth and using its advanced technology to observe the cause of the crash and to track the facehuggers. It begins to erase the evidence of the Aliens' presence by destroying the crashed ship and using a blue liquid to dissolve the bodies of the facehuggers and their victims.
Meanwhile, ex-convict Dallas Howard (Steven Pasquale) has just returned to Gunnison after serving time in prison. He is greeted by Sheriff Eddie Morales (John Ortiz) and reunites with his younger brother Ricky (Johnny Lewis). Ricky has a romantic interest in his more affluent classmate Jesse (Kristen Hager) and is being harassed by her boyfriend Dale (David Paetkau) and two of his friends. Kelly O'Brien (Reiko Aylesworth) has also just returned to Gunnison after service in the military, and reunites with her husband Tim (Sam Trammell) and daughter Molly (Ariel Gade).
The Predator fights a number of Aliens in the sewers, and as the battle reaches the surface several of them disperse into the town. The Predator pursues some to the power plant, where collateral damage from its weaponry causes a city-wide power outage. Ricky and Jesse meet at the high school swimming pool but are interrupted by Dale and his cohorts just as the power fails and an Alien enters the building, killing Dale's friends. Another Alien invades the O'Brien home, killing Tim while Kelly escapes with Molly.
Kelly, Molly, Ricky, Jesse, Dale, Dallas, and Sheriff Morales meet at a sporting goods store to gather weapons. National Guard troops arrive but are quickly killed by the Aliens. When the battle between the Predator and the Aliens enters the store, Dale is killed and the Predator's shoulder cannons are damaged; it is able to modify one into a hand-held blaster.
As the survivors attempt to escape Gunnison they make radio contact with Colonel Stevens (Robert Joy), who indicates that an air evacuation is being staged at the center of town. Kelly is suspicious of the military's intentions, convincing a small group to go to the hospital where they hope to escape by helicopter, while Sheriff Morales heads to the evacuation area with the rest of the surviving citizens. The hospital, however, has been invaded by Aliens and the Predalien. The Predator soon arrives and in the ensuing battle Jesse is killed, Ricky is injured, and Dallas takes possession of the Predator's blaster cannon.
As the battle reaches the rooftop, Dallas, Ricky, Kelly, and Molly escape in the helicopter while the Predator battles the Predalien hand-to-hand. The two creatures mortally wound each other just as a military jet arrives; rather than a rescue airlift it is a bomber, executing a tactical nuclear strike that destroys the entire city and kills all of the extraterrestrials along with the remaining citizens. The shock wave causes the fleeing helicopter to crash in a clearing, where the survivors are rescued by the military. The Predator's blaster cannon is confiscated by Colonel Stevens and presented to a Ms. Yutani.