Koose Muniswamy Veerappan during his teenage starts working as an assistant to his relative Sevi Gounder, a notorious poacher and sandalwood smuggler. His father and relatives, whose village lay in the forest area, were also known to be poachers and smugglers. Veerappan (Sandeep Bharadwaj), dominant in Sathyamangalam Forest in the states of Tamil Nadu and Karnataka, defies the government, and Indian Border security paramilitary forces, and maintains a small army. He is wanted for killing approximately 184 people, about half of whom were police officers, including senior police and forest officials. He was also wanted for poaching about 200 elephants and smuggling ivory worth US$2,600,000 and about 10,000 tonnes of sandalwood worth approximately US$22,000,000.

In 1991, Veerappan and his chief Intel Gandhi beheaded IFS Officer P. Srinivas. Years later, Veerappan avenges the death of his close associate Gandhi by misleading Special Task Force (STF) personnel in their covert operation, through Gandhi's unnamed notorious informer. The covert mission led by T. Harikrishna S.P., and his informer S.I. Shakeel Ahmed to kill Veerappan fails miserably. Veerappan, and his army brutally assassinate all the STF officers in the operation and snatch their arms.

The Tamil Nadu STF chief K. Vijay Kumar I.P.S. appoints his associate, an undercover I.P.S. spy in the Karnataka region, a master-strategist (Sachiin J Joshi), who puts in place the Operation Cocoon through a network of tribal, and informers, such as a Deputy spy, a woman STF spy and landlord (Lisa Ray), who befriends and rents out a house to Muthulakshmi-the wife of Veerappan (Usha Jadhav). On the other hand, a team of loyal undercover cops led by Rambo Krishna, leave Palar base of STF, near M. M. Hills, 100 kilometres (62 mi) from Kollegal of Karnataka along with a team of 41 members which includes police from two states, forest officials, forest watchers and informers. The team travels in two vehicles, of which one is a bus carrying most of the team members, and a jeep carrying K. Goplakrishnan, the IPS officer. Veerappan's gang plants landmines on the road in more than 14 places to halt their approach, and during the Palar blast, K. Gopalakrishnan, standing on the footboard of the jeep is thrown out, and suffer severe injuries, leaving the police to retaliate and ultimately prevent the snatching of arms.

After few failed attempts, including the one led by another undercover cop, disguised as a subordinate to Islamic underworld don - Kadaani, to negotiate an arms deal with Veerappan's gang, the STF team led by master-strategist, and an ex-spy turned timberyard owner-Kumar, finally succeed on 18 October 2004. On that day, Veerappan is escorted out of the forest by Kumar who earlier infiltrates Veerappan's gang in disguise to negotiate another arms deal with Velupillai Prabhakaran. Subsequently, Veerappan and his men board an ambulance stationed at Papparapatti village in Dharmapuri district. Veerappan and his men are first warned and then asked to surrender, which was denied, and the men start firing at the STF personnel. The STF retaliate by firing grenades and gunfire subsequently, Veerappan and his men are killed on the spot.