In August 1994 at the Tarasco bar in Mexico, an American man named Buscemi tells the story of witnessing a massacre in another bar, committed by a Mexican who had a guitar case full of guns. The bar's patrons are uninterested until Buscemi mentions the name "Bucho". Meanwhile, El Mariachi has a dream of his encounter with Moco, Bucho's underling, who killed his lover and shot his left hand, but Buscemi awakens him and tells him to continue searching for Bucho.

El Mariachi meets a child, whose father allegedly plays guitar for a living. Having been a guitarist himself, he gives the boy some guitar lessons. At the Tarasco bar, El Mariachi engages in a tense standoff with Bucho's henchmen, followed by a massive gunfight. El Mariachi kills everyone in the bar but Tavo, who was in a back room conducting illegal business. Tavo survives and follows El Mariachi outside and wounds him, but is killed by El Mariachi. Carolina, a woman who El Mariachi shielded from Tavo's bullets, takes him to her bookstore. Bucho arrives at the bar to survey the carnage. Threatened by the situation, Bucho orders his men to hunt down the man "dressed in black".

At her bookstore, Carolina tends to El Mariachi's wounds. While he rests, she discovers the guns in his guitar case and deduces his identity, based on Buscemi's story. El Mariachi asks her to help him locate Bucho. He goes to the town church and talks to Buscemi. Upset by the massacre at the bar, Buscemi convinces El Mariachi to abandon his quest for revenge. Outside the church, they are ambushed by a man armed with throwing knives, who kills Buscemi and severely wounds El Mariachi. Bucho's men arrive at the scene, and mistake the man (who dresses in black) for El Mariachi and kill him. They take the body back to Bucho, who realizes they have killed the wrong person, a hitman named Navajas sent by the Colombians to kill El Mariachi.

As an injured El Mariachi wanders the streets he meets the kid with the guitar, once again. He learns that the kid is being used by his father to mule drugs hidden in his guitar. He angrily confronts the boy, who tells him most people in the town work for Bucho. El Mariachi returns to Carolina and learns that Bucho financed her bookstore as an additional front for his drug dealing. Bucho arrives, unexpectedly, and she hastily hides El Mariachi. She feigns ignorance of the commotion in town, and Bucho leaves. Carolina completes the suturing of El Mariachi's wounds. That evening, she gives El Mariachi a new guitar, which he plays for her before they make passionate love. Meanwhile, Bucho realizes that Carolina lied to him.

In the morning, Bucho's men arrive and attack them and set the bookstore ablaze. The two fight their way out of the burning building and onto a local rooftop, where El Mariachi gets a clear shot at Bucho but inexplicably chooses not to attempt to kill him. The two hide in a hotel room.

Angry about their failure to kill El Mariachi, Bucho gathers his men and says: "You drive around town, you see someone you don't know, you shoot them! How hard is that, huh?" He shoots one man and then fires at the others, as an example.

Realizing that Bucho will never stop hunting him, El Mariachi contacts his friends, Campa and Quino, for assistance. The trio meets up on the edge of town and encounters Bucho's henchmen. A massive gun battle ensues, and most of Bucho's men, along with Campa and Quino, are killed. El Mariachi discovers that the guitar-playing boy has been wounded in the crossfire and rushes him to a hospital.

El Mariachi and Carolina travel to Bucho's compound intending to confront him. It is then revealed that Bucho is El Mariachi's older brother, Cesar. El Mariachi was unaware of "Bucho's" identity, until he saw his brother's face, from the rooftop, and refrained from shooting him. Bucho offers to release El Mariachi if he allows Bucho to kill Carolina. El Mariachi kills his brother, then shoots the remaining henchmen. The two visit the boy in the hospital, and El Mariachi leaves him alone. Carolina catches up to him on the road and picks him up, with El Mariachi initially leaving his weapons on the side of the road. The two drive away together, but shortly return and pick up the guitar case, full of guns, just to be safe.