At the Woltz International Studios, Hagen has a few respectable words with Woltz:

Hagen: Uh, I was sent by a friend of Johnny Fontane's - his friend is my client, who'd give his undying friendship to Mr. Woltz, if Mr. Woltz would grant us a small favor...Give Johnny the part in that new war film you're starting next week.
Woltz (after laughing): And, uh, what favor would, uh, your friend, uh, grant Mr. Woltz?
Hagen: You're gonna have some union problems, my client could make them disappear. Also, one of your top stars has just moved from, uh, marijuana to heroin...
Woltz: Are you trying to muscle me?
Hagen: Absolutely not.
Woltz: Now listen to me, you smooth-talking SOB! Let me lay it on the line for you and your boss, whoever he is. Johnny Fontane will never get that movie! I don't care how many - dago, guinea, WOP, greaseball, goombahs come outta the woodwork!
Hagen: I'm German-Irish...
Woltz: Well, let me tell you something, my kraut mick friend. I'm gonna make so much trouble for you, you won't know what hit you!
Hagen: Mr. Woltz, I'm a lawyer, I have not threatened you.
Woltz: I know almost every big lawyer in New York, who da hell are you?
Hagen: I have a special practice. I handle one client. Now you have my number. I'll wait for your call. By the way, I admire your pictures very much. (Hagen shakes Woltz's hand, then leaves.)

Later, at Woltz' extravagant estate where Hagen is invited for an elegant dinner, Woltz is more apologetic and conciliatory: "Why didn't you say you worked for Corleone, Tom? I thought you were just some cheap, two-bit hustler Johnny was running in trying to bluff me?" Hagen explains his normal procedure: "I don't like to use his name unless it's really necessary." Woltz proudly displays his beautiful $600,000 stud horse, Khartoum. At dinner, Woltz learns: "Mr. Corleone is Johnny's godfather. To the Italian people, that's a very religious, sacred, close relationship." Woltz still stubbornly refuses to give Fontane the part for Corleone:

Woltz: ...just tell him he should ask me anything else. But this is one favor I can't give him.
Hagen: He never asks a second favor when he's been refused the first, understood?
Woltz: You don't understand. Johnny Fontane never gets that movie. That part is perfect for him. It'll make him a big star. And I'm gonna run him out of the business, and let me tell you why...

Woltz explains how one of Woltz International Picture's young female proteges was ruined by Fontane when she left him and ran off with him after thousands of dollars were spent on her training:

...And let me be even more frank. Just to show you that I'm not a hard-hearted man, that it's not all dollars and cents. She was beautiful. She was young, she was innocent! She was the greatest piece of ass I've ever had, and I've had 'em all over the world. And then Johnny Fontane comes along with his olive-oil voice and guinea charm. And she runs off. She threw it all away just to make me look ridiculous, and a man in my position can't afford to be made to look ridiculous! Now you get the hell outta here! And if that goombah tries any rough stuff, you tell him I ain't no band leader! Yeah. I heard that story.

Tom politely excuses himself from dinner, thanking Woltz for the very pleasant evening and asking for a car ride to the airport: "Mr. Corleone is a man who insists on hearing bad news immediately." After friendly persuasion has failed, the Don's power is illustrated in the next scene. The recalcitrant Woltz wakes up in his silk-sheeted bed. As he pulls back the sheets, he finds himself in a slippery pool of blood with the severed head of his favorite prized horse. His horrific screams are heard at dawn over all of his Hollywood estate.

Following World War II, there are many challenges for old-fashioned Don Corleone whose prime specialty is gambling. The introduction of heroin business into Mafia operations is threatening. Not long after his daughter's wedding, there is a meeting scheduled with all the representatives of other "families." To prepare for the meeting, Hagen briefs Corleone about the narcotics business, endorsed by rival racketeer Virgil Sollozzo (Al Lettieri) - the 'Turk' [his nickname, because he owns poppy fields in Turkey]:

Sollozzo is known as 'The Turk.' He's supposed to be very good with a knife, but only in matters of business or some sort of reasonable complaint. Uh, his business is narcotics. He has fields in Turkey where they grow the poppy. And in Sicily, he has the plants to process them into heroin. Now, he needs cash and he needs protection from the police, for which he gives a piece of the action. I couldn't find out how much. The Tattaglia family is behind him here in New York.

Sonny is in favor of pushing drugs: "There's a lot of money in that white powder." Tom legally advises Corleone to consider entering the drug business because it is the wave of the future:

Well, I say yes. There's more money potential in narcotics than anything else we're looking at. Now if we don't get into it, somebody else will. Maybe one of the Five Families, maybe all of them. Now, with the money they earn, they can buy more police and political power - then they come after us. Now we have the unions, we have the gambling, and they're the best things to have. But narcotics is a thing of the future. And if we don't get a piece of that action, we risk everything we have - I mean not now, but, uh, ten years from now.

Corleone, Fredo, Clemenza, Sonny, Tessio and Hagen meet with Sollozzo - a maverick, shifty rival gangster who is chief spokesman for the Tattaglias - another Mafia family that is headed by Phillip Tattaglia (Victor Rendina). Sollozzo is also Tattaglia's chief assassin (he is reported to be "very good with the knife"). As they discuss the future of criminal enterprises, Sollozzo attempts to persuade the Don, "a man who has powerful friends," to enter the new burgeoning business. During the meeting, it is proposed that in exchange for a Corleone loan of a "million dollars in cash," the Corleones would receive 30 percent of the profits ("in the first year, your end should be three, four million dollars, and then it would go up") for their protection of police and political connections ("so I receive thirty percent for finance, political influence and legal protection").

But an old-school Mafia leader, Don Corleone refuses to join - he is reluctant to spoil and jeopardize his smooth relations between the "families" and with his political contacts (certain powerful politicians). He is content with the status quo and what he governs - gambling, prostitution, and protection rackets:

I must say no to you, and I'll give you my reasons. It's true. I have a lot of friends in politics, but they wouldn't be friendly very long if they knew my business was drugs instead of gambling, which they rule that as a - a harmless vice. But drugs is a dirty business...It makes, it doesn't make any difference to me what a man does for a living, understand. But your business, is uh, a little dangerous.

[Although Corleone's decision appears to be a wise one, he is short-sighted when he argues that his "friends in politics" would be squeamish about accepting dirty drug money.] Making a tactical blunder during the meeting, Sonny blurts out his thoughts - revealing his disagreement with his father's decision and his unbridled enthusiasm for getting into the drug business. He interrupts his father and shows interest in the proposal - and the Tattaglias' willingness to guarantee the Corleone's loan:

Aw, you're telling me that the Tattaglias guarantee our investment?

For overstepping his bounds (Clemenza, Sollozo, and Tom all express dismay on their faces), Sonny is diplomatically reprimanded by his father in the rival gang's presence: "I have a sentimental weakness for my children, and I spoil them, as you can see. They talk when they should listen." Once Sollozzo leaves with the Don's parting words of congratulations and luck ("as best as your interests don't conflict with mine"), Corleone tells his hot-headed, brainless, impulsive son with a brain that's gone soft from too much sex:

Whatsa matter with you? I think your brain's goin' soft ...Never tell anybody outside the family what you're thinking again.

Although only implicit, the Don realizes that Sollozzo now knows that Sonny would join the narcotics venture, splitting and weakening the unified Corleone family and his empire of control. Sollozo now believes that the Corleones would cooperate if Vito were to be eliminated. A bloody gang war is soon to follow for control of the entire Mafia empire. The Don immediately instructs his principal lieutenant Luca Brasi to spy on the Tattaglias. Corleone tells Brasi to pretend that he is not happy with the Corleones.

I'm a little worried about this Sollozzo fellow...Go to the Tattaglias and make them think that you're not too happy with our family. And find out what you can.

In a grisly but riveting murder scene, Brasi (wearing a bullet-proof vest) meets at Tattaglia's bar with the Mafia head's son Bruno Tattaglia (Tony Giorgio) and Sollozzo (who has already seen through the attempt at infiltration).

Sollozzo: (translated in subtitles) I think you and I can do business. I need someone strong like you. I heard you are not happy with the Corleone family. Want to join me?

Sollozzo offers Brasi $50,000 "to start with" to betray the Corleones. When Sollozzo extends his hand to seal the deal, Brasi won't shake hands with him and formalize the lie he has just perpetrated. Sollozzo, who has a reputation for being "very good with the knife" displays his handiwork by brutally ice-picking Brasi's hand into the top of the bar to render him helpless. As Tattaglia holds his hands down, a hit man grabs Brasi from behind and slowly strangles him to death with a tightened garrote - Brasi gurgles and his eyes bulge as he sinks from view. He collapses to the floor - his death is filmed through the fish-decorated outer glass doors of the bar.

Other victims in the Corleone empire are targeted - Sollozzo kidnaps Tom Hagen on a city street while he is Christmas shopping. The Don is also a victim, set up by his regular chauffeur Paulie when he calls in sick and permits Fredo to drive Corleone into an ambush readied by the rival gang. While shopping on an open street market for fruit in Little Italy in December 1945, nine shots are fired by two gunmen - five find their mark. Corleone's weak-willed son Fredo helplessly watches the assassination attempt, believing that his father is dying after he upsets a basket of oranges and topples onto the street. [Later, Corleone dies with an orange peel in his mouth.]

Michael is slowly drawn into the world of the Mafia. As he is walking with Kay by Radio City Music Hall (playing Leo McCarey's popular film The Bells of St. Mary's), he reads about his father's attempted assassination from a Daily Mirror newspaper headline: "VITO CORLEONE FEARED MURDERED," "Assassins Gun Down Underworld Chief." Temporarily taking over the Corleone business is the Don's hot-tempered eldest son Sonny.

Sollozzo wishes to position Tom Hagen to bargain with and persuade Sonny, heir apparent, to approve of the narcotics deal:

Sonny was hot for my deal, wasn't he? And you knew it was the right thing to do...you gotta talk some sense into him. The Tattaglia family is behind me with all their people. The other New York families will go along with anything that will prevent a full-scale war. Let's face it, Tom, and all due respect. The Don, rest in peace, was slippin'. Ten years ago could I have gotten to him? Well, now he's dead. He's dead, Tom, and nothing can bring him back. So you gotta talk to Sonny, you gotta talk to the 'capo' regimes [meaning heads of a department], that Tessio and Fat Clemenza. It's good business, Tom.

Sollozzo isn't worried about retaliation from Luca Brasi: "Let me worry about Luca." He lets Hagen walk out unhurt: "I don't like violence, Tom. I'm a business man. Blood is a big expense." Although hit with five shots, the Don is "still alive!" and "looks like he's gonna pull through." Advising Sonny, Tom tells him what to do if "the old man dies":

If we lose the old man, we lose our political contacts and half our strength. The other New York families might wind up supporting Sollozzo just to avoid a long, destructive war. This is almost 1946. Nobody wants bloodshed anymore. If your father dies, you make the deal, Sonny.

Sonny orders Clemenza to immediately punish stoolie Paulie: "Take care of that sonofabitch right away. Paulie sold out the old man, that stronz. I don't want to see him again. Make that first thing on your list, understand?" Just then, a brown paper-wrapped package is delivered and unwrapped by Tessio - a fish is found within Luca's bulletproof vest. It indicates that Luca Brazi has been executed gangster-style - his body has been thrown in the river. Clemenza tells Sonny what it means:

It's a Sicilian message. It means Luca Brasi sleeps with the fishes.

Before taking Paulie for his last ride, Clemenza's wife asks her husband to do an errand: "Don't forget the cannoli!" Paulie is taken out to a field and while Clemenza relieves himself by the side of the road, hitman Rocco Lampone (Tom Rosqui) puts three bullets into the back of Paulie's head with three shots. In a classic line of macabre dialogue following the bloody hit job, Clemenza calls to his colleague:

Leave the gun. Take the cannoli.

They abandon the corpse and car on the deserted section of road - as a warning message to others about how traitors will be treated.

While visiting his father in the deserted hospital, in one of the film's most tense sequences, Michael senses that another attempt is about to be executed on his father's life. He notices the hospital is quiet and that no one is in the nurse's station - his wounded father is unguarded and unprotected. In another office, there is only a half-eaten sandwich on the desk. None of the family's armed guards are posted outside his father's hospital room - Room #2. A nurse tells Michael about why there are no guards: "Your father just had too many visitors. They interfered with hospital service. The police made them leave about ten minutes ago."

To save and rescue his father, he pushes his father's bed through the doorway to another room, convincing the nurse: "Men are coming here to kill him. You understand?" For a brief moment after moving him to a safer location, Michael talks to his father at bedside, assuring him of his security, and simultaneously transforming himself into his father's successor:

Just lie here, Pop. I'll take care of you now. I'm with you now. I'm with you.

He foils another attempt on his father's life by creating the impression outside the hospital that he and Enzo the baker (one of the Don's loyal petitioners from the opening scenes) are armed guards. Michael calmly helps Enzo light a cigarette after they have bluffed a black car with would-be assassins out of the attempt.

Police cars with sirens screech to a halt in front of the hospital. A crooked police Captain Mark McCluskey (Sterling Hayden) enters the scene, on the payroll of Sollozzo and the one responsible for removing the guards from Corleone's room to set up the second assassination plot. He orders Michael - derogatorily called a "guinea hood" and "a little punk" - off the premises - even after being told: "The kid's clean, Captain. He's a war hero. He's never been busted for the rackets." The Captain swings at Michael and breaks his jaw. A Corleone car screeches up to the hospital, bringing lawful private detectives - hired to protect Vito Corleone.

After the hospital incident, Sonny retaliates against Bruno Tattaglia in the early morning. His action heats up the gang warfare and makes the Corleone estate look like a "fortress." Sollozzo the "Turk" proposes another meeting to cool the all-out war, relayed by Sonny:

He wants us to send Michael to hear the proposition. And the promise is that the deal is so good that we can't refuse.

But Sonny is personally inflamed and wants to retaliate: "No more meetin's, no more discussions, no more Sollozzo tricks." Michael enters the discussion in the inner circle, warning: "We can't wait. I don't care what Sollozzo says about a deal, he's gonna kill Pop, that's it. That's the key for him. Gotta get Sollozzo." Shrewdly, Michael helps plan a meeting to establish a truce between the families. But the truce meeting is devised to allow him to take revenge both for his father and himself, against a "dishonest" and "crooked cop":

Michael: They wanna have a meeting with me, right? It will be me - McCluskey - and Sollozzo. Let's set the meeting. Get our informers to find out where it's gonna be held. Now, we insist it's a public place, a bar, a restaurant, some place where there's people so I feel safe. They're gonna search me when I first meet them, right? So I can't have a weapon on me then. But if Clemenza can figure a way, to have a weapon planted there for me, then I'll kill 'em both.
Sonny (laughing, along with the others): Hey, what are ya gonna do, nice college boy, eh? Didn't want to get mixed up in the family business huh? Now you wanna gun down a police captain. Why? Because he slapped you in the face a little bit? Hah? What do you think this is, the Army? Where you shoot 'em a mile away? You've gotta get up close like this and bada-bing! You blow their brains all over your nice Ivy League suit...(He kisses Michael's head.) You're taking this very personal...
Michael: Where does it say that you can't kill a cop?...I'm talking about a cop that's mixed up in drugs. I'm talking about a dishonest cop and a crooked cop who got mixed up in the rackets and got what was coming to him...It's not personal, Sonny. It's strictly business.

According to Clemenza, it's been "ten years" since the last Mafia blood-war, but they often have healing consequences: "Helps to get rid of the bad blood." Clemenza has prepared a .22 caliber gun to be planted for Michael's use, with its butt and trigger wrapped in tape to prevent fingerprints, and left deliberately noisy ("that way it scares any pain-in-the-ass innocent bystanders away"). Just before the rendezvous over a meal of Chinese take-out food (!), Sonny is worried about the risk to his younger brother and tells Clemenza: "Hey listen, I want somebody good, and I mean very good, to plant that gun. I don't want my brother comin' out of that toilet with just his dick in his hands, all right?" Tessio drives Michael to the pick-up location, Jack Dempsey's Restaurant.

The superbly-staged scene of a truce meeting in early 1946 occurs between Michael and his family's sworn enemy Virgil Sollozzo and his bodyguard, corrupt ('bought') police Captain McCluskey. After picking Michael up, McCluskey apologizes for the hospital incident as he frisks him for weapons: "I guess I'm getting too old for my job, too grouchy. Can't stand the aggravation. You know how it is." They first drive toward New Jersey - when Sollozzo's driver Lou suddenly takes an abrupt, squealing U-turn on the George Washington Bridge. They arrive back in New York at LOUIS' Italian-American RESTAURANT in the Bronx - a quaint, neighborhood place with only four other diners. It is a perfect, out-of-the-way, set up location for assassinating both of them point-blank.

During a meal of veal (recommended by Sollozzo as "the best in the city"), Michael goes to the restroom after being given permission by McCluskey: "You gotta go, you gotta go." He is relieved to find the gun planted for him (by Clemenza) behind the old-fashioned toilet fixture. An unseen subway train passes loudly by - the noise parallels the tremendous strain in Michael's head. After returning to the table, Sollozzo continues talking in Sicilian to him, but Michael is suffering too much mental anguish to listen - tension is raised as he sits and the sound of Sollozzo's words fade as the camera shows a closeup of Michael's eyes. He stands, quickly shoots Sollozzo in the head, and then shoots a stunned McCluskey once in the throat and once in the forehead. As instructed, he quickly walks to the door and drops the gun, and is driven away by Tessio in a waiting car.

A montage of gangland violence and "bad blood" erupts as newspaper headlines dissolve into view, illustrating amongst them the killings of four men:

• New York World-Telegram: POLICE HUNT COP KILLER
• New York Journal American: CITY CRACKS DOWN - Pressure on Organized Crime
• The Sun: POLICE CAPTAIN LINKED WITH DRUG RACKETS
• The Daily Mirror: MOBSTER BARZINI QUESTIONED IN UNDERWORLD FEUD
• THIRD MONTH OF GANGLAND VIOLENCE
• SYNDICATE BIG SHOT VITO CORLEONE RETURNS HOME

Corleone, now released from the hospital, is upset and angered to learn that his son Michael has been sent into exile to Silicy until he can safely return. Insensitive and boisterous, Sonny wants to continue retaliating by violent means, first by going after Bruno Tattaglia himself:

Sonny: I want you to find out where that ol' pimp Tattaglia is hiding - I want his ass now, right now.
Tom: ...Things are starting to loosen up a bit. If you go after Tattaglia, all hell's gonna break...
Sonny: Oh, Tom.
Tom: ...loose. Let, let the smoke clear. Pop can negotiate.
Sonny: No, Pop can't do nothin' till he's better. I'm going to decide what's going to be done.
Tom: All right, but your war is costing us a lot of money, nothing's coming in...We can't do business...
Sonny: Well, neither can they! Don't worry about it.
Tom: They don't have our overhead...We can't afford a stalemate.
Sonny: Well, then, there ain't no more stalemate - I'm gonna end it by killin' that ol' bastard! I'm gonna...kill...
Tom: Yeah, well, you're getting a great reputation. I hope you're enjoying it.
Sonny: Well, you just do what I tell you to do. Goddamn it. If I had a wartime consigliere, a Sicilian, I wouldn't be in this shape!...