An aging, respected commander played by Charlton Heston is on his final submarine tour before his retirement. Surfaced and returning to port, the submarine USS Neptune, is struck by a giant freighter in heavy fog, and sinks to a depth of 1,450 feet (442 meters) on a canyon ledge above the ocean floor. A United States Navy rescue force commanded by a character played by Stacy Keach arrives on the scene, but Neptune is subsequently rolled by a landslide to a greater angle that does not allow the Navy's Deep Submergence Rescue Vehicle (DSRV) rescue submarine to complete its work.
A small experimental submersible, Snark, is brought in to assist with the rescue. Snark is very capable, but run by a nonconformist U.S. Navy officer misfit played by David Carradine. The tiny submersible is the only hope for a rescue.
Ronny Cox plays Neptune's executive officer, scheduled to take over command from Charlton Heston's character, Ned Beatty plays Snark's second crewman, and Christopher Reeve appears in his first film role in a bit part that a sharp-eyed viewer might notice.
In the opening credits, footage of the real-life submarine USS Trout (SS-566), filmed specifically for Gray Lady Down, depicts the fictional USS Neptune. Gray Lady Down also re-used submarine special-effect footage and the large-scale submarine model originally used to portray the fictional submarine USS Tigerfish in the 1968 movie Ice Station Zebra to depict USS Neptune.
The movie was adapted from the 1971 novel Event 1000 by David Lavallee.