His lawsuit says "motion picture studios are notoriously greedy" and Warner Bros "sat on the money owed" for years "without any justification".
Warner Bros has not commented on the legal action.
Stallone's legal papers say his representatives raised the issue of owed money with Warner Bros in 2014 but were told by the film company that they didn't have to pay him anything because Demolition Man had lost $66.9m.
He queried this, and in April 2015 the studio sent Stallone a cheque for $2.8m.
The lawsuit alleges: "WB just sat on the money owed to [Stallone's company] Rogue Marble for years and told itself, without any justification, that Rogue Marble was not owed any profits."
In the lawsuit, which was filed at Los Angeles Superior Court, the star is seeking a full accounting of the film's proceeds, in addition to interest and damages.
The legal action also seeks "an end to this practice for all talent who expect to be paid by WB for the fruits of their labour".
Stallone starred in Demolition Man alongside Wesley Snipes. They played a cop and criminal who are cryogenically frozen and then brought back to life in the future into a world without crime.
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