In the dockside longshoreman's union shack, Johnny Friendly appears fearful of Terry squealing and giving his testimony to the commission. He asks Charley if he will play 'deaf and dumb' - assured that strong-arm tactics are needed to hush him up:

All I want to know is, is he D and D or is he a canary?

Charley says he doesn't know: "All right. Maybe the boy is outta line, but he's just a confused kid." Fearing Terry's growing sympathy toward the priest and Edie, Friendly instructs Charley to warn his brother off.

The next scene is the most memorable scene - the famous taxi cab scene between the two brothers, wonderfully acted and underplayed. Charley and Terry have just entered the back seat of a New York taxicab. Charley tells Terry that he's heard a rumor that Terry might testify in court: "The grapevine says that you got a subpoena." Charley advises him to keep his mouth shut and not testify ("be a cheese-eater") about what he knows about the corrupt union bosses - or else! Terry is offered an easy loft job ("a boss loader slot...on the new pier") worth up to $400 a week, promising: "You don't do anything and you don't say anything." But Terry is uncertain about the conditions:

There's more to this than I thought, Charley.

Exasperated with Terry's unwillingness to immediately comply, Charley turns toward his stubborn brother: "You don't mean that you're thinkin' of testifyin' against some people that we might know?" Agitated, Terry argues desperately: "I'm tellin' ya. I haven't made up my mind yet!" Charley suggests that if they get to their destination, 437 River Street, and Terry hasn't made up his mind, there may be serious consequences. Terry is stunned by his brother's words.

Suddenly, Charley pulls a gun, points it at his brother, and threatens him to take the job and not talk. Surprised, Terry pushes the gun away - he gently guides its barrel down: "Charley ... Charley ... Oh, Charley. Wow." After a long pause, Charley changes the subject and begins a nostalgic, but inaccurate look back at Terry's early life as a boxer:

How much you weigh, slugger? When you weighed 168 pounds, you were beautiful. You could have been another Billy Conn. That skunk we got you for a manager, he brought you along too fast.

Embittered, Terry faces up to the fact that he has made nothing of his life - he blames his brother instead of his manager for his failings. Terry is reminded of how he was given "a one-way ticket to Palookaville" in his boxing days when he knew he had a winner inside himself, but was told to lose in fixed fights. At one point in his life, he could have risen about his low-life condition through his skill as a prizefighter. He poignantly looks back to the night of the fight when he lost all his sense of personal worth and integrity. He realizes that his brother betrayed him and sold him out to Palookaville (a reference to a palooka, an inferior or average boxer) for a quick profit, with these words expressing his terrible loss:

It wasn't him, Charley! It was you. You remember that night in the Garden, you came down to my dressing room and said: 'Kid, this ain't your night. We're going for the price on Wilson.' You remember that? 'This ain't your night!' My night! I coulda taken Wilson apart! So what happens? He gets the title shot outdoors in the ball park - and whadda I get? A one-way ticket to Palookaville.

He continues his sad, pitiable lament, and blames his brother for compromising and sacrificing his boxing career and his life, thus preventing him from becoming a contender for the title:

Terry: You was my brother, Charley. You shoulda looked out for me a little bit. You shoulda taken care of me - just a little bit - so I wouldn't have to take them dives for the short-end money.
Charley: I had some bets down for you. You saw some money.
Terry (yelling, and heartbroken): You don't understand! I coulda had class. I coulda been a contender. I coulda been somebody, instead of a bum, which is what I am. Let's face it (pause) ...... It was you, Charley.
Charley: OK, OK, I'll tell him I couldn't find you. Ten to one he won't believe it.

Charley, numbed by his brother's confession, shows that he cares for his brother rather than being cold-blooded. He hands Terry a gun for protection ("Here, take this, you're gonna need it"). After Terry jumps out of the taxi, the driver takes Charley not to the Garden, but to a River Street garage, where Truck, Friendly and others are glimpsed. [Charley's failure to convince his brother not to testify against the mob, or to kill his brother to silence him, dooms him.]

Terry rushes to Edie's place, where she is in bed, wearing only a white slip. In the hallway, he knocks numerous times and pleads with her to let him in. She begs: "Stay away from me." He insists fiercely: "Come on, please open the door please." He finally breaks the door down, and as she huddles in bed, she draws back the covers over her: "I want you to stay away from me." After he tells her: "Edie, you love me...I want you to say it to me," she responds: "I didn't say I didn't love you. I said, 'STAY AWAY FROM ME." But he puts his arms around her, and they end up embracing in a kiss.

A few moments later, they both hear a voice calling to Terry from outside: "Your brother's down here. He wants to see ya." Terry leaves, with Edie following, believing it might be a trap to set him up. When he sees Edie being pursued in the dark alley by a truck deliberately driven towards them, he breaks the glass window in an adjacent doorway with his hand and protectively pulls Edie inside. As the truck passes by, its headlights illuminate the murdered body of his brother. Not able to convince his brother to remain silent, Charley has been viciously killed - his body swings from a longshoreman's baling/meat hook in the back alley. Waving Charley's gun, Terry vows to avenge his brother's death: "I'm gonna take it out of their skulls."

Terry emerges from the group of longshoremen to break the stranglehold of the corrupt union. The brutal killing of his brother completes his conversion. He seeks vengeance by turning informant stoolie and betraying Friendly. In the neighborhood bar, Terry is convinced by Father Barry to avoid violence, drop his gun, and fight Friendly in the courtroom with moral truth to break the code of silence on the docks and Friendly's stranglehold:

You want to hurt Johnny Friendly? Huh? You want to hurt him? You want to fix him? Do ya? Do you really wanna finish him...for what he did to Charley and a dozen other men who are better than Charley? Then don't fight him like a hoodlum down here in the jungle because that's just what he wants. He'll hit you in the head and plead self-defense. You fight him in the courtroom tomorrow, with the truth as you know the truth.

Terry hurls his gun into a picture hanging behind the bar showing Friendly arm-in-arm with "Mr. Upstairs," an important personage.

In the courtroom the next day, Terry arrives to testify in televised hearings before the Waterfront Crime Commission instead of taking a gun down to the waterfront to kill Friendly. First to testify under oath is Big Mac, who makes the suspicious claim that the financial records of the local waterfront union happened to be stolen the night before. The second witness, Terry, turns "stoolie" and betrays Friendly through his testimony. He admits being the last person (except for the two mugs who murdered him) to see Joey Doyle before he was pushed from the roof the night he was found dead. After the murder, he claims he went immediately to the Friendly Bar where he expressed his feelings about the murder to Mr. Johnny Friendly.

In an elegant room where a TV set broadcasts Terry's testimony, "Mr. Upstairs" tells his butler: "If Mr. Friendly calls, I'm out...If he calls ever, I'm out." After Terry's words contribute to breaking wide open the case of Joey Doyle, the counsel pointedly sneers toward Friendly: "You've begun to make it possible for honest men to work the docks with job security and peace of mind." Friendly threatens Terry with unemployment and worse, and they must be pulled apart by police guards:

You've just dug your own grave. Go fall in it. You're dead on this waterfront and every waterfront from Boston to New Orleans. You don't drive a truck or a cab. You don't push a baggage rack. You don't work no place. YOU'RE DEAD!

In his room when he returns from the courthouse, he finds Edie preparing hot coffee and waiting for him. Moody and disheartened, he tells her: "My friends don't won't to talk to me." Neighborhood friend Tommy, who used to admire and idolize him, has killed his pigeons on the rooftop and tossed the body of a dead bird at him: "A pigeon for a pigeon." He is derided and ostracized as a 'canary.' Edie finds him sitting dejected in the coop, where all of his birds have had their necks wrung. She sympathizes with him: "There no place that's safe for you now on the waterfront." The slaughter of his beloved birds is almost more upsetting to Terry than the murder of his brother Charley.

Up to this point, Terry always thought of himself as a bum. Now, he is determined to stand strong and prove that he isn't afraid of Johnny Friendly or any of the others at the shape-up. Transformed by the love of Edie and his confrontation with the union boss helps him develop self-esteem. Terry no longer believes that he is a bum:

They always said I was a bum. Well, I ain't a bum, Edie.

Fed up and frustrated, but with a deliberate sense of dignity, Terry grabs Joey's jacket and decides to go down to the morning shape-up for work to get his 'rights.' As he appears at work to make a defiant stand, the other longshoreman speak in low murmurs about him, stare at him, and avoid him as an informer.

Inside the union headquarters, a shack at dockside, Friendly feels the pressure from the courtroom ordeal with Terry. He reads the headlines of The Daily Tribune: "NAME JOHNNY FRIENDLY AS WATERFRONT MURDER BOSS." He tells his fellow mugs: "Wait till we get off this front page. Then he's mine. I want him. You hear that? He's mine."

Terry is passed over for work that day and left standing alone. The last person hired, instead of him, is the one-armed drifter named Mott - who is now apologetic. Big Mac growls at Terry: "You want more of the same? Come back tomorrow."

In the union shack, Johnny collects guns from his reluctant goons: "Did you ever hear of the Sullivan Law? They'll be down on us for the slightest infraction now - anything. I'm gonna be indicted any minute...Can you get it through your heads? They're dustin' off the hot seat for me. We're a law-abidin' union. Understand?"

Compulsively, Terry marches with a crowd following behind, down the ramp to the union office. He passionately challenges Friendly and his cohorts when they appear:

You take them heaters away from you and you're nothin', you know that?...You take the good goods away and the kickbacks and the shakedown cabbage and them pistoleros and you're nothin'. Your guts is all in your wallet and your trigger finger - you know that?...You give it to Joey. You give it to Dugan. You give it to Charley, who was one of your own. You think you're God almighty. But you know what you are?...You're a cheap, lousy, dirty, stinkin', mug. And I'm glad what I've done to you.

Friendly beckons Terry with his hands, tempting him to fight, causing Terry to take the aggressive challenge.

The film concludes with a confrontation and a furious, savage, bloody fight between Terry and Johnny. Until he is overwhelmed and outnumbered by Friendly's thugs, Terry lands some effective punches. Amazed longshoremen watching the struggle creep forward, but are prevented from assisting Terry. He is beaten unmercifully behind the shack and nearly killed in the fight to the death. A swollen-faced Friendly invites Edie and Father Barry, who have arrived, to attend to battered Terry's bloody wounds: "You want 'im. You can have 'im. (To Edie) The little rat's yours." As he lies there senseless and crumpled on the deck, Terry is barely conscious.

When the longshoremen are called back to work, they rally behind their fallen Terry, impressed by his courageous will. They threaten Friendly that they won't return to work without him:

Longshoremen: How about Terry? He don't work, we don't work.
Friendly: Work! He can't even walk!

The father of murdered Joey Doyle impulsively shoves Friendly from the dock into the cold water, causing a roar of laughter from the crowd. As Terry is assisted, numb, bloody and injured, he rallies them and painfully prepares to walk back to work. Speaking for all of them, one of the longshoremen vows: "If Terry walks in, we walk in with him. (To Father Barry) They're waitin' for him to walk in." Father Barry urges Terry to lead them in, although he is slow to respond:

Do you hear that, Terry?...You lost a battle, but you have a chance to win the war....Can you walk?...Just finish what you started. You can!

Groggy and uncomprehending, Terry staggers to his feet to walk up the ramp to the dock as a symbolic act of courage. He slowly weaves and pushes toward the loading pier where the shipping boss stands, as longshoremen follow him. Nearly martyred but alive, he breaks the strangle-hold power of the union boss. The workers, forming a line on the side, rally around their new leader as he leads the loitering longshoremen back to work through the gate - in an act of defiance. They ignore the desperate screams of the soaking-wet Friendly, who tries to prevent them from following:

Where you guys going? Wait a minute? I'll remember this! I'll remember every one of ya! I'll be back, don't you forget that. I'll be back.

The union boss points at them with an accusing finger, with ominous last words: "I'll be back." But his words fall on deaf ears in the optimistic, symbolic, and melodramatic ending of the film.