Lester Burnham (Spacey) is a cynical 42-year-old man living in the suburbs. His wife Carolyn (Bening) is an ambitious, but bitter, burned-out realtor who secretly dislikes her work. Their daughter Jane (Birch) is a "typical" teenager.
Neither Lester nor Carolyn are happy at all in their marriage; each one blames the other one for their unhappiness and as a result, they spend many dinners bickering across the table at each other, which in turn costs both of them Jane's respect.
However, Lester finds motivation for transforming himself after meeting Angela Hayes (Suvari), Jane's best friend and classmate. Angela, a beautiful, confident, and supposedly promiscuous cheerleader who aspires to be a model, captivates Lester the moment he sees her perform a school dance routine, and he develops an obvious crush on her, much to Jane's embarrassment and disgust. Angela, however, finds Lester "sweet" and later comments to Jane that if he were more muscular, she would "totally fuck him," which Lester overhears. He starts an intensive workout regimen.
Lester, who secretly enjoys annoying Carolyn, also begins to revert to adolescent, immature behavior and begins smoking pot and flirting with Angela.
Meanwhile, a family consisting of the conservative Colonel Frank Fitts, USMC (Cooper), his catatonic wife Barbara (Janney), and their introspective son Ricky (Bentley) moves next door to the Burnhams. Jane begins to notice Ricky videotaping her through her bedroom window, which secretly flatters her.
In one eventful day, Carolyn begins an extramarital affair with a rival realtor, Buddy King (Gallagher) and also decides to begin relieving her stress at a shooting range; Lester is fired from his job (which he really is not sorry about since he hated the job anyway), mouths off at his boss, then blackmails his boss for an enormous severance package, and begins work anew at a fast food restaurant, wanting the job with the "least possible amount of responsibility," which infuriates Carolyn, who will now have to shoulder the bulk of the household bills; and Jane and Ricky bond over camcorder footage of a plastic bag "dancing" in the wind, which Ricky considers the most beautiful thing he has ever recorded.
The next day Lester calmly catches his wife with her lover at a drive-thru window of the fast food restaurant where he has now taken a job. Carolyn's lover breaks off their liaison, and she angrily drives home with her gun with the intention of confronting her husband, believing him to have ruined her life. Lester calls Ricky to the house for marijuana, raising the suspicions of an already angry Col. Fitts, who becomes convinced that his son is gay and subsequently forces him to leave the house. Ricky is happy to oblige.
When Ricky and Jane plan to leave for New York City, Angela, who is visiting Jane's house, accuses both of being "freaks," to which Ricky retorts that she is ugly, ordinary, and boring. At the same time, Lester is confronted and kissed by an emotional Col. Fitts, but he rejects this advance as a misunderstanding.
Lester then finds Angela in tears. His attempt to seduce her derails when she says that she is a virgin. He cannot bring himself to take her virginity and instead makes her a snack and soda in the kitchen. For the first time in a long while, Lester realizes that he is not so cynical anymore and is enjoying a high, especially when Angela asks how he is; Lester is flattered at having a young girl admiring him once again. As Angela heads to the bathroom, Lester contemplates an old photo of his once-smiling family - unaware that a gun is being held to his head.
The movie ends with Lester's description of his life flashing before his eyes, interspersed with scenes of his family and others at the moment of the gunshot. It is revealed that the gun that killed him was in fact that of Col. Fitts, and not Carolyn's. Lester's final narration is I can't feel anything but gratitude for every single moment of my stupid little life. You have no idea what I'm talking about, I'm sure. But don't worry... you will someday.