After the death of his mother Ishwari, Ajay Ghale (James A. Woods) returns to his home country of Kyrat to carry out Ishwari's final wish by scattering her ashes in a place called Lakshmana. However, his mission is interrupted when the bus he is traveling on is attacked by the Royal Army and he is taken prisoner by Pagan Min (Troy Baker), the country's eccentric and violent king who claims to have been romantically involved with Ishwari. After finding his way through Pagan's mansion, Ajay escapes with the aid of Sabal (Naveen Andrews), a commander in the Golden Path, a rebel movement established by Ajay's father, Mohan Ghale. Ajay is not able to leave the country as the royal army has taken control of the Kyrat's only airport and sealed the borders.

In the twenty years since Ishwari and Ajay fled Kyrat, the rebellion has stagnated, with the Golden Path fighting for their very existence. As the son of Mohan Ghale, Ajay becomes a symbol for the Golden Path to rally around, and after freeing a group of hostages and liberating territory held by Pagan, they plan on breaking Pagan's stranglehold on power by targeting his three regional governors: Paul "De Pleur" Harmon (Travis Willingham), who oversees opium production and runs Pagan's torture chambers; Noore Najjar (Mylène Dinh-Robic), who runs poaching and prostitution rings and is herself a victim of Pagan's cruelty after he kidnapped her family; and Yuma Lau (Gwendoline Yeo), Min's adopted sister and trusted general who is obsessed with uncovering the secrets of the mystical realm of Shangri-La.

However, the Golden Path's newfound momentum is threatened by deep divisions between its commanders Sabal, who favours traditional values at the expense of outdated world views; and Amita (Janina Gavankar), who argues for progress, which includes relying heavily on drug trade. Ajay is forced to intervene on several occasions, with his decisions influencing the direction the Golden Path will take. The first governor to fall is De Pleur after Noore helps Ajay find a way to infiltrate De Pleur's stronghold, allowing the rebellion to capture him. Amita and Sabal later task Ajay with confronting and killing Noore. She dies in her fighting arena as a consequence of either Ajay killing her, or suicide upon learning Pagan had her family executed years beforehand.

As the Golden Path secures Kyrat's southern provinces, Ajay is contacted by Willis Huntley (Alain Goulem), a CIA agent who offers intelligence for the rebels and pages from his father's diary in exchange for killing Yuma's lieutenants. After Ajay kills several of them, Huntley admits they were in fact undercover CIA agents, and that he was sent to clean up after the CIA, as the agency did not see Pagan as a threat anymore. Huntley betrays Ajay to Pagan just as the Golden Path prepare to push into Northern Kyrat.

Ajay ends up in Yuma's mountain prison, which he manages to escape from. In the process he finds out that Yuma has started despising Pagan, primarily because of his affections toward Ajay's late mother.[b] The Golden Path pushes into the north, and while Ajay attempts to reconnect with another faction of the rebels, Pagan, aware of Yuma's plotting against him, betrays Yuma to the Golden Path. Ajay is drawn into a confrontation with her and prevails, but tensions between Amita and Sabal reach new heights, and Ajay is forced to make a final decision as to who will lead the Golden Path. Whichever leader he chooses then sends him to kill the other to prevent them from starting another civil war, and Ajay can choose to kill them as ordered or let them go. With the Golden Path now united under a single leader, Ajay joins them for an attack on Pagan's fortress and pushes on alone to Pagan's palace while the Golden Path holds off the military.