Shankar is an orphan raised by a sincere police officer Raja Rao. In an unexpected situation, Raja Rao’s son Bharath kills a kid and Shankar takes the blame on him and is imprisoned while Raja Rao warns him not to meet him again. Years later Shankar is a CI who is referred as ‘Encounter’ Shankar because of his track record as an encounter specialist. He is posted to Bukkapatnam town in Tadipatri, Ananthapuram and is assigned the task of ending the illegal businesses of a dreaded local don Damodar whose dream project is to build a power plant.
Using his clever mind, Shankar destroys all the three main businesses of Damodar by trapping the respective in-charges of those businesses. He brings a stay on the power project by bringing few vital witnesses. On a parallel note, Shankar loves a sweet shop owner named Saroja who reciprocates his love at a later point of time.
A person named Shekhar approaches Shankar and through him, he informs the local SP Mallikharjun that he is the witness of the murder of environmentalist Prakash by Damodar. Later Damodar influences all the witnesses including Shekhar before Shankar could arrest him while Mallikharjun apologizes to Damodar and leaves. Later he comes to know that Raja Rao’s son Bharath, the district collector committed suicide along with his wife who was a friend of Prakash because of defamation and personal attacks when Bharath tried to stop the power project in which Damodar held half of the share and Mallikharjun, Central minister Nagaraju held the remaining half share. Before dying Bharath revealed the truth behind Shankar to Raja Rao thus uniting them. Shankar swears to take revenge and by using a lawyer named Database Danayya, he gathers information regarding the power broker of this project named Delhi Suri, Mallikharjun and Damodar’s conservative girlfriend named Sukanya who actually was an actress working in C-grade films in the past.
By trapping initially and blackmailing later, Shankar gets hold of Delhi Suri and with this help, he creates rift between Damodar and Nagaraju and gets the latter killed by Damodar’s henchmen. Later by blackmailing Sukanya that they would reveal her past to Damodar, they trap Mallikharjun with her help and accuse him of a rape attempt on Sukanya though Mallikharjun was a gay which none believed. Mallikharjun is killed by poisoning the food he ate while Damodar’s brother Durga is killed by Damodar himself after Shankar pollutes his mind saying Durga is trying to kill him for wealth. Meanwhile Shankar and Saroja get engaged. Delhi Suri comes to know about Database Danayya and destroys his office. Danayya takes revenge by revealing Delhi Suri’s role in the murders of the three people. When Damodar tries to kill Delhi Suri at his guest house, he is confronted by Shankar who kills him after a long fight. Bharath receives posthumous recognition for his honesty while Delhi Suri turns a police informer working under Shankar.