Max Payne, an NYPD Detective working in Hell's Kitchen, New York City, returns home to find several violent junkies in his house. In the ensuing gunfight, he stumbles upon the body of his dead newborn daughter and his wife. Subsequent investigations reveal that the junkies were high on Valkyr, a new drug being dealt on the streets, at the time of the murders. Three years later, Max is now an undercover agent in the DEA and embedded in the Punchinello Mafia family, which deals in Valkyr. Max is asked to meet Alex Balder, a fellow officer and friend of Max, in the subway. However, when he gets there, he finds a dead police officers body in a bathroom. Max realizes he's in trouble and searches for Alex Balder, shooting a countless number of Punchinello thugs. On the way, he rescues an officer about to be executed (who was killed not too long later) and thwarts a robbery beneath the subway system. Max meets up with Alex after blasting down a door the robbers were using to steal gold. Alex hints that Jack Lupino may be behind the events that have recently occurred. However, before he can say more, an assassin shoots Balder several times at a point blank range, killing him. Max flees the subway, shooting a few more thugs on the way and barely evading police capture. The police believe that Max Payne was the one who murdered Alex Balder.
Still using his undercover identity, Max visits the Finito brothers, two highly known members of the Punchinello Mob, in a hotel to see if they know where Lupino is. Upon seeing them, his cover is blown. Max and the Finito brothers have a shootout, leading to the deaths of the Finito brothers. Max finds a clue in their room that leads him chasing for Vinnie Gognitti, another highly known criminal associate of the Mob. While searching for him, Max kills several more criminal associates, including a hustler named Rico Muerte and a prostitute named Candy. Max finds and shoots Gogniti in an alleyway and interrogates him. He reveals that Lupino is at a nightclub called Ragnarok downtown. Max leaves Gognitti bleeding in the alleyway.
Max arrives at the nightclub and shoots every thug that gets in his way. When Max reaches the top floor, he fights his way through a small group of thugs and eventually finds Jack Lupino, who apparently is high on Valkyr. Despite this, Max kills Lupino, shooting him multiple times even after he died. After killing him, Max meets a woman named Mona Sax, who both share a drink of whiskey. Unknowingly to Max, Mona spiked his drink. Max slips into unconsciousness and is taken away by the Mob.
After having a disturbing nightmare, Max Payne wakes up only to find himself tied to a chair; he is being interrogated by Frankie "The Bat" Niagra. Max jokes about the name, saying he cries a lot. Frankie returns the favor by hitting him in the head with a baseball bat. Frankie leaves Max Payne to go to the bar, where Max makes his escape. Although critically injured, Max still manages to heal himself and kill all of Frankie's thugs (using only a baseball bat from the start). Max surprises Frankie by arriving at the bar he said he was going to. The two have a gunfight and, as a result, Frankie is killed.
After leaving the bar, Max is being tailed by Vladimir Lem, the leader of the Russian Mob. Vladimir makes a deal with Max: In order to acquire an arsenal to take out the Don, Max'll have to kill Boris Dime, who has taken over Vladimir's cargo ship. Max kills Dime and all of his associates, thus gaining access to a weapons cache inside the cargo ship.
Don Punchinello calls Max Payne and tells him to meet him at one of his restaurants. Max knows that the Don won't be there, but goes anyway. Upon entering, the restaurant begins to explode; Max unknowingly walked into the Don's trap. Max eventually escapes the burning restaurant and walks outside.
Max Payne arrives at Don Punchinello's mansion, noticing the guards at the back gate are dead, thanks to Mona. Max kills all of the Don's henchmen, including his three loyal bodyguards and capos. He also discovers Lisa Punchinello (Mona Sax's twin sister) lying dead on the Don's bed. Before confronting Punchinello, Max hears a helicopter outside, but it isn't a police chopper. Max confronts Don Punchinello and he reveals that someone in the government is connected to Valkyr and his wife's murder. Suddenly, three government agents in suits storm the room and kill Punchinello. Payne quickly kills them and decides to leave the mansion. As soon as he leaves Punchinello's room, several agents and a woman named Nicole Horne are surrounding him. Nicole gives Max Payne a large quantity of Valkyr, leaving him to die. Before passing out, Max hears Nicole tell her agents to take her back to Cold Steel.
Max survives the overdose and pursues his only clue, which leads him to a military bunker protected by many mercenaries. After killing a handful of mercenaries and being discovered, Horne's agents decided to initiate a self-destruct program (despite the fact mercenaries are still inside). Max kills the agents as well as the rest of the mercenaries. Shortly before leaving the bunker, Max Payne finds out what Valkyr was really for. The government tried making a drug that increased the stamina and performance of soldiers, but the project failed. Nicole Horne decided to continue these experiments. however, Payne's wife accidentally found out about this experiment and was killed for it. After seeing this file, Max escapes the bunker mere seconds before it explodes.
Max receives a call from B.B.(another fellow officer of Max) and he tells him to meet him atop of a parking garage. Max finds out that B.B. killed Alex Balder and framed him and that B.B. was going to finish the job by killing him. Despite B.B. telling Max that "You can't win this one." he makes sure that B.B. doesn't leave the parking garage alive. Max kills B.B. and all of his thugs. Max then receives a phone call from a man named Alfred Woden to meet him at the Asgrad building.
Woden reveals to Max that he is part of a secret organization called the Inner Circle. He tells Max that if he kills Nicole Horne, the CEO of Aesir Corp., he'll be free of all his police charges. Shortly after offering the deal, the room is stormed by Horne's agents and all the Inner Circle members (except Woden, who fakes his death) are killed. Max escapes the room and kills all the mercenaries and agents inside the Asgrad building. Before leaving, he takes a tape of Alfred Woden with a prostitute as blackmail in case he backs out of the deal.
Max arrives at Aesir Corp. and shoots all the mercenaries and agents he sees. He also survives getting shot at by three mercenaries with grenade launchers. When Payne gets to the elevator, he is surprised that Mona is inside and she points her gun at Max's forehead. Nicole tells Mona to kill Max, although she isn't able to. More agents in suits arrive and try to kill Payne. Instead, they shoot Mona Sax in the head. After Max kills the agents, he opens the elevators again, only to be shocked that Mona's body isn't there. Max enters the elevator and destroys mines that have been placed inside the elevator shaft. Max Payne continues to kill agents and mercenaries. When Max enters an elevator that leads to a higher floor, he is ambushed by Horne's spy helicopter and is almost killed. He evades the assault by jumping into the adjacent elevator and going to the top floor. Payne confronts Horne and kills four more agents. Shortly afterward, he is ambushed by the spy helicopter again and survives. Max guns for Nicole, shooting any agents that get in his way. As a last ditch effort, Nicole throws a grenade at Max, which doesn't kill him. Nocle and Max arrive on the roof. Before Payne could kill Nicole, she escapes into her spy helicopter and locks the doors behind her. Max shoots out two cables supporting a large mast that is leaning right next to the helicopter...
Ending A: Max is unable to shoot out the remaining cables and the helicopter takes off. Max shoots at the spy helicopter, but it's no use; the helicopter riddles Max Payne with bullets and kills him.
Ending B: Max shoots out another support cable and kills four more agents. He then shoots out the last support cable, making the mast critically unstable. Finally, Max shoots several bullets at the mast itself, cutting it in half. The mast slowly falls toward Nicole's helicopter and crashes onto it, blowing up the helicopter just as it's about to take off. The helicopter pad, the spy helicopter, and the mast all fall hundreds of feet toward the ground, exploding into pieces. Nicole's helicopter is flattened by the pad. Max Payne looks down at the wreckage and releases his finger from the trigger just as the police arrive to take him into custody. But he doesn't care; Nicole Horne's dead and he's avenged his wife's murder.
Deputy Chief Jim Bravura takes Max Payne into custody. While inside the police cruiser, Payne glances at Woden, who was standing in the crowd of men and women. Both of them smile smugly, a "smile of a winner" as Max said.
The game contains many references to Ragnarok, the Norse end of the world, during which the world is swallowed by snow and darkness. One of the levels takes place in a night club called Ragna Rock. While inside of Ragna Rock, Max comes across a book entitled The Age of Murder and Storm which mentions "Norse mythos and Ragnarok".