Kent Paul and a paranoid Love Fist band informs Tommy that a psycho killer wants Love Fist dead. Tommy drives in the Love Fist limo to Rock City where Love Fist plans to have a signing in order to draw the psycho out. When Tommy arrives, the cross-dressing killer kills a security guard and blames Love Fist for ruining his life. The killer escapes in his Sentinel as Tommy pursues him. Tommy eventually "kills" the killer, completing the mission.
In order to complete the mission the player must:
Drive the limo to the singing event and try to draw the psycho out
The title is likely a reference to the 1977 song "Psycho Killer" by the Talking Heads.
An alternative method to driving the cumbersome Love Fist stretch is to park a PCJ-600 near the drug store that's close to the record store where the chase starts. After the cut scene drive to it, quickly abandon the limo and get on the PCJ. Since the PCJ have no problem catching up to the psycho's Sentinel and can shoot forward, it makes the mission a cinch. However, the bike obviously, is a lot more vulnerable, as being ejected from the bike from a crash can greatly hinder the player from catching up to The Psycho.
During the chase, a pink arrow appears over the psycho's Sentinel, but the psycho does not show up on radar. This means if the player crashes and loose sight of the target vehicle, he can easily fail the mission since there is no other way to track the target.