The movie begins with Lester Burnam, a forty-something man living somewhere in suburban America who is unsatisfied with his life. He experiences a total change after he becomes infatuated with his daughter's schoolfriend, Angela, a young woman eager to show off to her classmates just how beautiful and sexy she is. Part of the change is helped by him rediscovering his youth through exercise and smoking marijuana, bought from a drug dealer, a young man named Ricky Fitts, who has moved in next door to him recently. Quitting his job (and blackmailing his boss for $60,000), he takes up a humiliating job at a small drive-through restaurant (Mr. Smiley's).
Meanwhile, Carolyn (his wife), a sarcastic woman who loves power, begins an affair with a local real-estate magnate (Buddy Kane). She is later discovered when her husband catches her kissing Buddy while the two are at Mr. Smiley's.
At about the same time, Jane - their daughter - falls in love with Ricky. The two of them eventually decide to elope when Colonel Fitts, seeing Ricky and Lester together, mistakingly thinks that they are having a sexual relationship, and kicks his son out of his house (Fitts is in fact a repressed homosexual). On that same night, Angela and Jane have a fight; Angela comes to Lester, and the two of them almost make love. Lester suddenly realises how big a mistake he would be making when Angela reveals that she is a virgin. The movie ends with Lester being killed by Colonel Fitts out of misplaced anger.
There is a hint of recursion in the story - Ricky resembles a younger Mr. Burnam in many ways. This is further strengthened at the end, when Lester - after dying - uses Ricky's words ("there is so much beauty in the world ...") to describe how he sees the world.