In 1898, Buffalo Soldiers from the U.S. Army's 10th Cavalry Regiment, led by Jessie Lee (Mario Van Peebles), are fighting in the Spanish–American War in Cuba. As the segregated African-American unit is barely holding its own against constant attacks from enemy troops, Jesse runs back to the command post of the corrupt and racist Colonel Graham (Billy Zane) to request that the 10th Cavalry be allowed to pull back. Colonel Graham orders Jessie to shoot a deserter in exchange for allowing the 10th to retreat. Unable to kill a man in cold blood, Jessie demonstrates excellent marksmanship by shooting the man's cigar from his mouth. Colonel Graham then kills the deserter, and offers Jessie's command of the 10th to Little J (Stephen Baldwin), another White prisoner (the alternative would be to face the firing squad). Graham then orders the 10th to fall back in order to begin another mission, one in which they will be required to wear civilian clothing, as opposed to their Cavalry uniforms. They are ordered to rob a Spanish gold shipment, which is a setup to give the Colonel an excuse to execute the entire 10th Cavalry as deserters. As he meets them with his own cavalry force, his aide Weezie (Charles Lane) causes a distraction, allowing the 10th to shoot the Colonel and his cavalry down.
With Colonel Graham and his troops supposedly dead, the remnants of the 10th—including Jessie, Obobo (Tiny Lister), Angel (Tone Lōc) and Little J, along with Weezie—sneak out of Cuba and Jessie leads them to New Orleans. Soon after arriving their arrival, Little J meets a gambler named Father Time (Big Daddy Kane) and they begin playing poker, at which point Time is caught cheating. Little J helps the gambler escape and they go back to the hotel room where the others are hiding, telling them "We were never here" in fear that the vengeful gamblers might come for them. Doing just as J feared, the gamblers come in search of him and Father Time, only to be shot in the back by Colonel Graham and his troops, who survived the skirmish in Cuba. Angel is killed in the firefight while Little J, Father Time and the others barely escape. They meet up with Jessie who had left earlier to finish some business in a town out West.
The newly formed "posse" heads West with Colonel Graham on their heels every step of the way. They eventually stop in a town where Jessie has ammunition custom-made out of gold in order to kill the demons of his past, using one to kill the man who made the ammunition—as he was one of the men who lynched Jesse's father King David (Robert Hooks) years earlier (Father Time later explains that the voodoo ladies in New Orleans believe that gold is the only way to kill a demon). They make their way to Freemanville, a town founded by King David and composed entirely of African-Americans. Jessie is reunited with several old acquaintances, including his good friend Carver (Blair Underwood), who is now the sheriff of Freemanville. Carver's deputy goes to Cutterstown, not wanting to tip anyone off that Carver is working with Cutterstown's sheriff, Bates (Richard Jordan). He informs Bates that Jessie has returned to Freemanville. The "posse" enjoys the hospitality of Freemanville until Bates tells Carver that the town will burn unless Jessie is turned over to him and his deputies (Sheriff Bates and one of his deputies were men that had lynched King David, and were afraid that Jessie had come back for revenge). Bates and a few of his deputies attack Freemanville that same night looking for Jessie. One of the deputies beats Weezie in order to get answers. Watching in disgust, Little J fights back in defense of Weezie. Outnumbered, Little J is kicked and beaten to death by Bates and his men, and while Obobo and Jessie's former mentor Papa Joe (Melvin Van Peebles) are taken to Cutterstown as prisoners. Jessie and Father Time soon rescue them by posing as Ku Klux Klan members and storming into the Cutterstown jail. Jessie kills one of the deputies, who was another one of King David's murderers.
When he returns he convinces the townspeople to fight Sheriff Bates by telling them he wants the land for himself to sell to the railroad when it comes through. The citizens of Freemanville fight Bates the next day when he rides in. As they begin to gain the upper hand, Colonel Graham arrives with his cavalry and a Gatling gun which he uses to cut the people down. Jessie charges the gun with a stick of dynamite destroying the gun and killing some of Graham's troops.
Meanwhile, Carver plans to flee with the deeds to all of the property in Freemanville—all of which are in his name—but is stopped by Papa Joe's daughter Lana (Salli Richardson). Father Time shows up just in time to stop Carver from harming Lana. Time kills one of Carver's deputies, but is killed by Carver. Before Carver can flee, he is stopped by Bates who reveals that they had a deal to split the proceeds from the land 50-50. Jessie arrives just in time to hear about the deal, and watches as Carver is betrayed and murdered by Bates. Jessie kills Bates in a showdown, finally putting his past demons to rest. Colonel Graham captures Lana and orders Jesse into the saloon, where they have a climactic fight resulting in Graham's death and the destruction of the saloon (which Graham had set ablaze). Jessie, Obobo, Weezie and Lana watch as the townspeople fight the fire.
The story ends almost a century later with an old man (Woody Strode) being interviewed by reporters (Reginald Hudlin, Warrington Hudlin) about the black cowboys of the Old West. The man, who was a young boy when he met Jessie in Freemanville, gives the reporters a small book that Jessie had given him.
In the end, a caption goes on to tell that there had been over 8,000 black cowboys in the Old West whose stories had never been told due to omission by Hollywood and others alike.
Melvin Van Peebles, the father of director Mario Van Peebles, recorded a new song, "Cruel Jim Crow", for the film, his first music recording in 20 years, after his 1974 album What the....You Mean I Can't Sing?! It led to the production of a new album, Ghetto Gothic, released in 1995.
Posse was the first film to be released by Gramercy Pictures, which would eventually become Focus Features. It grossed $18.2 million in the U.S. and Canadian domestic market, with US$8.555 million in rentals.
The film was panned by most mainstream critics and has 31% on Rotten Tomatoes. Janet Maslin of The New York Times stated, "On the one hand, this obviously talented film maker celebrates all the aggrandizing features of the genre: the laconic tough talk, the manly camaraderie, the proud posturing, the power of walking tall past the awestruck citizenry of a prairie town. On the other hand, "Posse" does its best to reject and avenge what it regards as the flagrant distortions of the past." Roger Ebert described it as "an overdirected, overphotographed, overdone movie that is so distracted by its hectic, relentless style that the story line is rendered almost incoherent." And Entertainment Weekly gave it a C+ and said it was "a glossy, kinetic pastiche of Western conventions."