The film stars Pacino as Carlito Brigante, a fictional Puerto Rican criminal who vows to go straight and to retire in paradise. However, his criminal past proves difficult to escape, and he unwittingly ends up being dragged into the same activities that got him imprisoned in the first place. The film is based mainly on After Hours, but used the title of the first novel to avoid it being confused with Martin Scorsese's 1985 film of the same name.
Carlito's Way received a mixed response from critics, with a similar lukewarm result at the box office, but has subsequently gained a cult following. Both Sean Penn and Penelope Ann Miller received Golden Globenominations for their performances. A prequel titled Carlito's Way: Rise to Power, based on the first novel, was filmed and released direct-to-video in 2005.
In 1975, after serving 5 years of a 30-year prison sentence, Carlito Brigante (Al Pacino) is freed on a legal technicality exploited by his close friend and lawyer, Dave Kleinfeld (Sean Penn). Carlito vows to be through with his criminal activities but is persuaded to accompany his young cousin Guajiro (John Ortiz) to a drug deal held at a bar. Guajiro is betrayed and killed by his suppliers and Carlito is forced to shoot his way out. Afterwards, Carlito takes Guajiro's $30,000 from the botched deal and uses it to buy into a nightclub owned by a gambling addict named Saso (Jorge Porcel) with the intent on saving $75,000 to retire to the Caribbean.
As nightclub co-owner, Carlito declines several offers for a business partnership with a hot-headed young gangster from the Bronx named Benny Blanco (John Leguizamo). Carlito also rekindles his romance with his former girlfriend Gail (Penelope Ann Miller), a ballet dancer who moonlights as a stripper. Kleinfeld develops a love interest with Benny's girlfriend, Steffie, a waitress at the club. Benny's frustration with Carlito's constant rejections boils over and he confronts Carlito one night at his table. Carlito publicly humiliates Benny, who reacts by manhandling Steffie. Fueled by his now-extensive use of alcohol and cocaine, Kleinfeld brazenly pulls out a gun and threatens to kill Benny, but Carlito intervenes. Despite being personally threatened by Benny himself, Carlito lets Benny go unharmed; a decision which alienates Carlito's gangster friend and personal bodyguard Pachanga (Luis Guzmán).
Kleinfeld, who stole $1 million in payoff money from his Italian mob-boss client, Anthony "Tony T" Taglialucci, is coerced into providing his yacht to help Tony T break out of the Rikers Island prison barge. Kleinfeld begs for Carlito's assistance in the prison break, and Carlito reluctantly agrees. Under cover of night, Carlito, Kleinfeld, and Tony T's son, Frankie, sail to a floating buoy outside of the barge where Tony T is waiting. As they pull Tony T aboard, Kleinfeld unexpectedly kills him and Frankie and dumps both of their bodies in the East River. Carlito immediately severs his ties with Kleinfeld and decides to leave town with Gail. The next day, Kleinfeld barely survives a retaliatory assassination attempt when he's stabbed in the chest at his office by two mobsters.
Carlito is apprehended by police and taken to the office of District Attorney Norwalk (James Rebhorn), where he is played a tape of Kleinfeld offering to testify to false criminal allegations against Carlito. Norwalk advises that he is aware of Carlito as an accomplice to the Taglialucci murders in an attempt to leverage him into betraying Kleinfeld to save himself, but Carlito refuses. Carlito visits Kleinfeld under police protection in the hospital, where he confesses to selling him out. Having noticed a suspicious man dressed in a police uniform waiting in the lobby, Carlito deftly unloads Kleinfeld's revolver and parts ways with him. The man turns out to be Tony T's other son, Vinnie (Joseph Siravo), seeking vengeance for his brother and father. Vinnie sneaks into Kleinfeld's room and executes him without incident because of Kleinfeld's empty gun.
Carlito buys train tickets to Miami for himself and Gail, now pregnant. When he stops by his club to get the stashed money, Carlito is met by a group of mobsters led by Vinnie. The Italians plan on killing Carlito, but he manages to slip out through a secret exit. The Italians pursue him throughout the city's subway system and into Grand Central Terminal, where they engage in a gunfight. Carlito kills all of his pursuers except Vinnie, who is shot and killed by police attracted by the gunfire. As Carlito runs to catch the train where Gail and Pachanga are waiting for him, he is ambushed by a disguised Benny, who shoots Carlito several times in the abdomen with a silenced gun. Pachanga admits to the dying Carlito that he is now working for Benny, only to be shot as well. Carlito hands a tearful Gail the money and tells her to escape with their unborn child and start a new life elsewhere. As he is wheeled away on a gurney, Carlito stares at a billboard with a Caribbean beach and a picture of a woman. The billboard then comes to life in his mind, and the woman, who is clearly Gail, starts dancing as Carlito slowly dies.
- Al Pacino as Carlito Brigante. Pacino came to Carlito's Way directly from his Oscar-winning role in Scent of a Woman. To get into the character, he accompanied Torres through East Harlem. There he could absorb the sights and atmosphere. Pacino first envisioned Carlito with a ponytail. But after his visits to Harlem he quickly realized the guys there were not into wearing their hair that way. The beard was Pacino's idea. The black leather coat just fit into the period setting.
- Sean Penn as David Kleinfeld. For the pivotal role of Carlito's sleazy lawyer and best friend, Penn was lured back from early retirement by the challenge of playing the corrupt lawyer. Taking the role meant that he could finance his movie The Crossing Guard and work with Pacino. De Palma and Penn sat down and discussed what '70s mob lawyers looked like. Often, men in the entertainment business can look more bizarre than the talent they represent. Penn shaved the hair on the front of his forehead to give the appearance of a receding hairline. He permed the rest. Alan Dershowitz, believing that Penn was attempting to look like him, threatened the filmmakers with a defamation lawsuit.
- Penelope Ann Miller as Gail. Carlito's girlfriend and one of the few people he truly trusts, she is the only person who has ever seen Carlito's goodness. She is a dancer dreaming of the big time, but is reduced to working in a strip club to make ends meet. Although the story is a suspenseful crime thriller, their doomed romance is at the heart of the film. At the time, Miller was 29 years old to Pacino's 53. Casting for Gail proved difficult because of the character's striptease scenes. The character needed someone who was both a talented dancer and actor.
- John Leguizamo as Benny Blanco. Leguizamo completed the main cast as "Benny Blanco from the Bronx", an up-and-coming gangster who is determined to exceed Carlito's reputation but lacks any sense of ethics.
- Luis Guzmán as Pachanga. One of the few remaining old time friends of Carlito, he works as his right-hand man at the Club Paradise. He would eventually betray Carlito to work with Blanco. After Carlito escapes and kills the mobsters, Pachanga and Carlito run to Gail and the train, where Blanco shoots both Carlito and Pachanga. In Koepp's first draft of the screenplay, Pachanga spoke in a very heavy slang style. Following rumbles from the Latino cast and crew, Koepp toned this down.
- Jorge Porcel as Saso. Saso, or "Ron", is the owner of Club Paradise before Kleinfeld asks Carlito to take charge. He is a gambling addict with many dangerous debts to settle.
- Ingrid Rogers as Steffie. Rogers makes her feature debut as Steffie who works in the Club Paradise. She was initially Benny Blanco's girlfriend before she set her sights on David Kleinfeld and his riches.
- James Rebhorn as Bill Norwalk. Norwalk is the District Attorney involved with Carlito's conviction case. He shadows Carlito throughout the film trying to convict him, but eventually turns his attention away from Carlito and towards the corrupt Kleinfeld.
- Joseph Siravo as Vincent "Vinnie" Taglialucci. The elder son of Tony T and older brother of Frankie, he is out to avenge his father's and brother's deaths. Vinnie disguises himself as a police officer and kills Kleinfled. He and other Italian gangsters chase Carlito on the subway and into the train station. Carlito kills all except for Vinnie on the escalator. A wounded Vinnie staggers after Carlito but the police finish Vinnie off.
- Frank Minucci as Anthony "Tony T." Taglialucci. An Italian mob boss known as Tony T., he is the father of Vinnie and Frankie and a client of Kleinfeld. He lent him a million dollars for a payoff while in prison, but Kleinfeld laundered the money. He is sprung from the prison barge but is murdered by Kleinfeld before he can get out of the water.
- Adrian Pasdar as Frank "Frankie" Taglialucci. The youngest son of Tony T. and younger brother of Vinnie. He accompanies Kleinfeld and Carlito on the boat to rescue Tony. Kleinfeld kills him with a crowbar while he steers the boat, then dumps his and his father's bodies into the sea.
- Richard Foronjy as Pete Amadesso. An old acquaintance of Carlito and a business associate of Tony T and Vincent. He is among those who chase Carlito to Grand Central. Pete is shot by Carlito on the escalator.
- Viggo Mortensen as Lalin. Once a handsome, suave gangster friend of Carlito's, he is now a paraplegic in a wheelchair. He arrives at the nightclub wearing a hidden microphone to gain evidence against Carlito for DA Norwalk, as it is the only way he could stay out of prison.
- John Augstin Ortiz as Guajiro. Carlito's young, naive cousin, he convinces Carlito to make a stop at a pool hall as his backup during a drug deal. The deal goes wrong and he is killed by the drug dealers.
- Al Israel as Rolando. A former partner of Carlito's, whom he meets with, and announces his retirement to. Rolando is grateful to Carlito for not snitching on him while in prison, but doesn't believe Carlito would truly retire.
- Orlando Urdaneta as a bartender.