You know, Michael; now that you're so respectable, I think you're more dangerous

          than ever. I liked you better when you were just a common  Mafia hood.

 The movie begins in 1979, with a brief flashback establishing the long and tragic history of criminal activity within, and by, the Corleone family.

Much has changed. Michael Corleoneis now a defeated, depressed old man who feels tremendous guilt for indulging in his ruthless ambition many years ago. The thoughts of his children, and their future and happiness, is all he has to show for his ruthless ambition of his early years. His adopted brother Tom Hagen is now dead. The Corleone compound at Lake Tahoe is abandoned. His wife Kay has divorced him. And beset by his own depression and guilt, he had relinquished control of his children back to his rebellious wife, who spurned him long ago. Michael has returned to New York, where he is self-consciously using his enormous wealth and power to restore his dignity and reputation in the eyes of the public.

The violent criminal element of the Corleone family has been largely abandoned, ostracized by Michael himself as well as the hardened public, which no longer romanticizes the gangster lifestyle. In fact, Michael has embraced corporate America, which is now more tolerant of Michael's nihilism, where he is able to rebuild the Corleone family as a legitimate enterprise using the blood money from his free-wheeling gangster years. The aging thugs and sociopathic soldiers from Michael's past have either gone into the underground, or have been relegated to the background of Michael's life, serving as bodyguards for him and his family. Because his psyche and family remain largely damaged by his violent methods, Michael now struggles between repairing his fragile relationships while trying to contain the violent sociopaths that still fester in the shadows and ruins of his decaying criminal empire. In an attempt to seize upon the changing times, Michael creates a charity, the Vito Corleone Foundation, in memory of his father, and at a ceremony he is presided over by Archbishop Gildhay, where Michael is awarded the Order of St Sebastian. Kay, who has remarried, sits with Michael's children, Anthony and Mary.

At the lavish party following the ceremony, Anthony tells his father that he is going his own way, dropping out of law school to pursue a career as an opera singer. Kay supports his choice, but Michael argues in private about Anthony’s future, wishing that his son would join the business or do something respectful, like being a lawyer. Suddenly, Vincent Mancini (Sonny's illegitimate son), shows up at the party. He is embroiled in a feud with Joey Saza, the Corleone family's mafioso muscle. What remains of the old Corleone criminal empire is now under Zasa's stewardship. However, the old Corleone neighborhood in New York is in ruins, and has become lawless.

In a room away from the party, Vincent and Zasa tell Michael about their feud. The discussion grows violent, with Vincent accusing Zasa of being an out-of-control monster who mocks Michael behind his back. Michael makes it clear that he is not "a gangster" and that whatever bad blood exists between Vincent and Joey Zasa is none of his business, and must be settled between only them. So he asks the two men to make peace with one another. Feigning peace with Zasa, Vincent bites off part of Zasa’s ear after Zasa whispers "bastardo" in Vincent's ear. Zasa is escorted out and Michael scolds Vincent for his violent ways. But impressed by Vincent's passionate loyalty to protect him, Michael agrees to take his hot-headed nephew under his wing. The party concludes with a family picture where Michael asks Vincent to join the rest of the family.

Later, in an attempt to garner tremendous respectability and wealth for the Corleone Family through legitimate enterprise, Michael seeks to buy the Vatican's shares in an international real estate holding company, of which 25% is controlled by the Vatican. While in Vatican City, however, Michael learns that several influential parties oppose the deal for many reasons, not the least of which is the extensive criminal history that has tarnished the Corleone name. Because of this and the failing health of the 81-year-old Pope, ratification of the deal would be far more complicated than he had anticipated.

Don Altobello an elderly New York mafioso, tells Michael that his old New York partners want in on the Immobiliare deal. A meeting is arranged in Atlantic City, and Michael appeases most of the mafiosi with generous payoffs from their casino days. Zasa gets nothing. Furious, he declares that Michael is his enemy, and tells everyone in the room they must choose between him and Michael. Zasa storms out of the meeting. Don Altobello, the perpetual negotiator, runs after him to try and talk to him about this irrational move. Minutes later, a helicopter hovers outside the conference room and sprays a barrage of bullets through the ceiling windows. Almost everyone present is killed, but Michael, Vincent (acting as a human shield for his uncle), and Michael's bodyguard, Al Neri, all manage to escape. Back at his apartment in New York, as Michael considers how to respond to this hit, he suffers a diabetic stroke, and is hospitalized.

Though they are cousins, Vincent and Mary begin a romantic relationship. Unbeknownst to Michael, Vincent, with the urging of his aunt Connie, plots revenge against Joey Zasa. During a street fair Vincent and his accomplices kill Zasa's bodyguards, and Vincent shortly murders Zasa himself. Michael, still hospitalized, berates Vincent when he finds out, but Vincent insists that he got the go-ahead from Al Neri, who in turn insists that he got the go-ahead from Connie, who has become deeply involved in family affairs. Michael insists that Vincent end his relationship with Mary because Vincent’s involvement in the family puts Mary's life in jeopardy. Vincent agrees.

While in Sicily, Michael tells Vincent to speak with Don Altobello and, in order to see where the old man’s loyalties lie, to intimate to him his intentions of leaving the Corleone family, under the pretense that his affair with Mary is still in full swing, and that his loyalty to Michael has been supplanted by his desire to continue the relationship. Altobello supports the idea of Vincent switching his allegiance, and introduces him to Licio Lucchesi, the man behind the plot to prevent Michael’s acquisition of Immobiliare.

Michael visits Cardinal Lamberto, a well-intentioned and pious priest, to speak about the Immobiliare deal. Lamberto convinces Michael to make his first confession in thirty years; among other sins, Michael confesses to ordering the killing of his brother Fredo. It is an extremely emotional moment for Michael, and it troubles him deeply. Touring Sicily with Kay, who has arrived for Anthony’s operatic debut, Michael also asks for her forgiveness. As both admit that they still love each other, Michael receives word that Don Tommasino, his Sicilian friend and constant ally of the Corleone Family, has been killed, signaling that a new round of violence is about to begin. Cardinal Lamberto is elected, which means that the Immobiliare deal will likely be ratified, due to his intention to "clean up" the dealings of the Vatican. The new Pope's intentions come as a death knell to the plot against the ratification of the Immobiliare deal, prompting frantic attempts by the plotters to cover their own tracks.

Vincent tells Michael what he has learned from Altobello: Lucchesi is behind the plot against the Immobiliare deal, and an assassin (Mosca da Montelepre), the same who killed Tommasino, has been hired by Altobello to kill Michael. Vincent wants to strike back, but Michael cautions him, saying that if he goes ahead with such a plan, there’ll be no going back. Vincent insists on revenge, and Michael relents. He makes Vincent head of the Corleone family, the new Godfather. In exchange for the promotion, Vincent agrees to put an end to his relationship with Mary once and for all.

The family travels to Palermo to see Anthony. Vincent’s plans for revenge go into effect. Interspersed with scenes from Anthony’s performance are the brutal murders of Lucchesi, Altobello, Gilday, and their associates, who have already poisoned the new Pope. The assassin hired by Don Altobello to kill Michael descends upon the opera house during Anthony's performance, killing two of Vincent’s men in his attempt at murdering Michael, but the opera ends before he has the chance to do so. The assassin retreats to the opera house facade’s staircase, and tries to shoot Michael there.

Mary is confronting her father about the forced breakup with Vincent, when two shots ring out. The first hits Michael in the shoulder. While reeling from the impact, the second hits Mary in the chest, and she dies calling out to her father a single questioning word: "Dad?" Vincent then kills the assassin with a single shot. Cradling Mary's lifeless body in his arms, Michael screams with primal pain and rage. The first two screams are rendered silently with only background music; the third shout is heard by the audience. As they grieve, Connie, Kay and Vincent look upon Michael's distraught reaction momentarily shocked out of their own grief, almost in surprise, presumably only now realizing how truly dear his family were to him.

The scene dissolves to a short montage of Michael's memories, the first being a dance with Mary, the second being a dance with his first wife, Apollonia, and the last being a dance with Kay. The film ends in an unmentioned year with an aged and broken Michael, seated in the front yard of his Sicilian villa. He slowly puts on a pair of sunglasses, slumps out of his chair, collapses to the ground, and dies, totally alone......

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