Lester Burnham (Kevin Spacey) is a middle-aged magazine writer who despises his job. His wife, Carolyn (Annette Bening), is an ambitious real-estate broker; their sixteen-year-old daughter, Jane (Thora Birch), abhors her parents and has low self-esteem. The Burnhams’ new neighbors are retired United States Marine Corps Colonel Frank Fitts (Chris Cooper) and his introverted wife, Barbara (Allison Janney); their teenage son, Ricky (Wes Bentley), is a secret marijuana smoker and drug dealer whom the colonel subjects to a strict disciplinarian lifestyle. Ricky, who had been forced into a military academy and mental hospital, spends time recording his surroundings with a camcorder; he keeps dozens of taped videos in his bedroom.
Lester becomes infatuated with Jane’s cheerleader friend, Angela Hayes (Mena Suvari), after seeing her perform a half-time dance routine at a high school basketball game. He begins to have sexual fantasies about Angela, during which red rose petals are a recurring motif. Carolyn begins an affair with a business rival, Buddy Kane (Peter Gallagher). When Lester is about to be laid off his job he blackmails his boss for $60,000 and quits, taking employment serving fast food. He buys his dream car and starts working out after he overhears Angela tell Jane that she would find him sexually attractive if he improved his physique. He begins smoking marijuana bought from Ricky and flirts with Angela whenever she visits Jane. Jane becomes involved with Ricky and they bond over what Ricky considers the most beautiful imagery he has filmed: a plastic bag dancing in the wind.
Lester discovers Carolyn’s infidelity but reacts indifferently. Buddy ends the affair, saying he is facing an expensive divorce. Frank becomes suspicious of Lester and Ricky’s friendship, and finds his son’s footage of Lester lifting weights while nude, which Ricky captured by chance. Carolyn becomes distraught, loads a gun and drives home. That night, after watching Ricky and Lester through Lester’s garage window, Frank mistakenly concludes the pair are sexually involved. He later beats Ricky and accuses him of being gay. Ricky falsely admits the charge and goads his father into kicking him out of their home. Ricky convinces Jane to flee with him to New York City, and tells the vain Angela she is ordinary.
Frank confronts Lester and attempts to kiss him; Lester rebuffs the colonel, who leaves. Lester finds a distraught Angela, who begins to seduce him. After learning that Angela is a virgin, Lester stops and comforts her; the pair instead bond over their shared frustrations. Angela goes to the bathroom and Lester smiles at a family photograph in his kitchen. A gunshot sounds and blood splatters on the wall. Ricky and Jane find Lester’s body. Carolyn is seen crying in the bedroom, and Frank returns home, bloodied, a gun missing from his collection. Lester’s closing narration describes meaningful experiences during his life; he says that despite his death he is happy, as there’s so much beauty in the world