Sequel to Cotton comes to Harlem. Another bad influence is hitting Harlem and Gravedigger and Coffin Ed are the two cops who will stop it. Charleston Blue was a prohibition era black gangster, dead 4 decades. When he seems to have reappeared, once again slitting throats with his Blue straight edge razors, the two cops begin a complicated search for some answers.

Harlem police detectives Gravedigger Jones and Coffin Ed Johnson are working a routine security shift at a lavish debutante ball when a dead body is found in the kitchen's cold storage. They discover that the killer has left the murder weapon, a South Carolina blue switchblade, and taken off with dozens of frozen turkeys. Meanwhile at the party, suave fashion photographer Joe Painter, who is secretly conspiring to take over the Harlem drug trade from drug lord Caspar, easily charms a dance from Caspar's niece Carol and begins dating her soon after. Days later while visiting an elderly psychic, Her Majesty, the detectives learn that Her Majesty's murdered lover, Charleston Blue, got his nickname from using the blue switchblade. Discovering the box of switchblades she had set aside for her lover is empty, Her Majesty is convinced that Charleston Blue has returned to avenge his death. After the police report two more deaths using the signature blade and Her Majesty discovers Charleston's coffin empty, rumors spread throughout Harlem that Charleston's ghost has returned and is responsible for the disappearance of heroin in Harlem. In reality, Joe and his thugs are hijacking Caspar's drug shipments, using information he has culled from Carol. Joe has also broken into Caspar's drug operation, killing several men and stealing the turkeys in which Caspar and his men have hidden drugs. Meanwhile, naïve officers follow new precinct chief Bryce's mandate to arrest anyone even loosely associated with the militant group Black Berets for the recent murders, including twelve-year-old Douglas, a bookish boy who merely talks about revolution. When Digger and Coffin learn from Her Majesty that Joe has questioned her about Charleston's history, they suspect he is using Charleston as a ruse for his own drug hijacking and murders. While Digger and Coffin confront Joe about the Harlem drug trade, two of Caspar's hit men shoot at Joe from the skylight. Digger and Coffin easily outshoot them, saving Joe's life. Soon after, Digger and Coffin inform Italian Mafia leader Frank Mago, Caspar's supplier, that Joe has vowed to run him out of Harlem and have the drug trade run only by blacks. Back at his photography studio, Joe tells Carol that he is stealing the drugs and throwing them in the river to save the neighborhood, thus winning her admiration. Soon after, Digger and Coffin, suspecting Mago is using a coffin to ship his drugs from overseas, follow a hearse containing the latest coffin that has just arrived at the port. Within minutes, the hearse, which is filled with Mago's men wearing afro wigs and black face, is detoured into a cemetery by Joe's sanitation trucks blocking the road. Joe and his thugs are holding a mock graveside funeral and easily shoot and kill Mago's men, then escape in the hearse with Digger and Coffin in hot pursuit. Narrowly escaping Joe's sanitation trucks and a bomb thrown at them, Digger and Coffin shoot out the hearse's tires, causing the vehicle to flip. When the detectives find Caspar's dead body inside but lose Joe, Bryce adamantly demands they be taken off the case and reassigned to crosswalk guard duty under the supervision of a dim-witted white officer. Meanwhile, Joe meets with Mago, who offers him the same deal as Caspar's. However, Joe, who has stolen enough drugs to supply Harlem for a year, announces that he will find other suppliers in Southeast Asia before his current supply runs out, effectively cutting Mago out of the loop. Meanwhile, Joe's drug supply is easily distributed throughout Harlem, concealed in basketballs and dolls. Desperate to outwit Bryce so they can crack the case, Digger places an anonymous call to the police reporting a knife-wielding lunatic at a nearby building. When their white supervising officer is called to the scene, he confers with Digger and Coffin, who tell him that the building is a Black Beret hangout. The fearful officer promptly hands Digger and Coffin his gun and orders them to go into the building without him. As they enter, an explosion occurs, leading everyone to believe that the two detectives are dead. Back at Joe's place, Carol finally realizes that Joe is a drug dealer and is responsible for her uncle's death, but a transvestite, who is part of Joe's team, stops her before she can flee. Later, during a memorial service for Digger and Coffin at police headquarters, Joe tries to bribe Bryce into leaving his drug operation alone, but Bryce refuses. The next morning, Carol escapes the transvestite's clutches, catches a cab outside and soon recognizes that her driver is Digger. Sobbing that she does not belong anywhere, Carol agrees to show Digger and Coffin the storage room where Joe keeps the dolls and basketballs he uses to transport drugs. The detectives then sabotage each item by mixing a smoke bomb material into the drugs, so that as the addicts light up, smoke explodes in apartments, bars and on the streets. Learning of his ruined supply, Joe races to the mausoleum to retrieve his hidden dope in Charleston's coffin. Finding Douglas there, Joe tries to kill the young boy, but is thwarted by Coffin and Digger. When Joe tries to flee, he is confronted by Her Majesty, who, recognizing that Joe is far from being the real Charleston, slashes his throat with a blue blade. As Joe's body falls into the coffin, the others escape just as the mausoleum explodes from a bomb Douglas planted to destroy the remaining drugs. Her Majesty then calmly gets into a 1932 Lincoln, Charleston's favorite car, with a mysterious driver at the wheel.