In Winter River, Connecticut, Barbara and Adam Maitland decide to spend their vacation decorating their idyllic country home. As they are driving home from a trip to town, Barbara swerves to avoid a dog and the car plunges into the river. After returning home, she and Adam notice they now lack reflections and find the book Handbook for the Recently Deceased.
They begin to suspect they did not survive the car accident. When Adam attempts to leave the house, he ends up in a strange and otherworldly desert-like landscape populated by enormous sandworms.
The house is sold and the new owners, the Deetz family, arrive from New York City. Charles Deetz is a former real estate developer; his second wife Delia is a self-proclaimed sculptor; and his teenage goth daughter Lydia, from his first marriage, is an aspiring photographer. Under the guidance of interior designer Otho, the family transforms the house into a pastel-toned work of modern art.
Consulting the Handbook, the Maitlands travel to an otherworldly waiting room populated by other distressed souls where they discover the afterlife is structured according to a complex bureaucracy involving vouchers and caseworkers. The Maitlands' caseworker Juno informs them they must remain in the house for the next one hundred and twenty five years on pain of a dire fate. If they want the Deetzes out of the house, it is up to them to scare them away.
Although Adam and Barbara remain invisible to Charles and Delia, Lydia can see the ghost couple and befriends them. Against Juno's advice, the Maitlands contact the miscreant Betelgeuse, Juno's former assistant and a now freelance "bio-exorcist", to scare away the Deetzes. At first, they are unaware his name is pronounced "Beetlejuice", which is why they have such difficulty pronouncing it and thereby summoning him.
However, Betelgeuse quickly offends the Maitlands with his crude and morbid demeanor: they reconsider hiring him, though too late to stop him from wreaking havoc on the Deetzes. The small town's charm and the supernatural events inspire Charles to pitch his boss Maxie Dean on transforming the town into a tourist hot spot, but Maxie wants proof of the ghosts. Using the Handbook for the Recently Deceased, Otho conducts what he thinks is a séance and summons Adam and Barbara, using their wedding clothes, but they begin to age and decay as Otho had unwittingly performed what was actually an exorcism instead.
Horrified, Lydia summons Betelgeuse for help; but he will only help her on the condition that she marries him, enabling him to freely cause chaos in the mortal world. He saves the Maitlands and disposes of Maxie, his wife, and Otho, then prepares a wedding before a ghastly minister. The Maitlands intervene before the ceremony is completed, with Barbara riding a sandworm through the house to devour Betelgeuse.
Finally, the Deetzes and Maitlands agree to live in harmony within the house. Betelgeuse is stuck in the after-life waiting room. He switches number tickets with a witch doctor who shrinks his head. Being Betelgeuse however, he remains upbeat and states that it is a good look for him. Lydia dances happily away with the ghosts.