Flashy young bowler Roy Munson (Woody Harrelson) wins the 1979 Iowa state bowling championship and leaves home to turn professional. In his professional bowling tour debut, he defeats established pro Ernie McCracken (Bill Murray), who takes the loss poorly and seeks revenge. McCracken convinces Roy to join him in hustling a group of local amateur bowlers. When the amateurs become furious after realizing they are being conned, McCracken flees while Roy is brutally beaten and loses his hand when it is forced into the ball return, ending his career. Seventeen years later, Roy uses a prosthetic hand and is living in Scranton, Pennsylvania as an alcoholic, unsuccessful traveling salesman of bowling supplies. He is always behind on his rent and is constantly harassed by his landlady Mrs. Dumars (Lin Shaye), eventually being reduced to trade sexual favors with her for a break on his back rent.

On a sales visit to a nearby bowling alley, Roy meets Ishmael Boorg (Randy Quaid). Roy tries to convince Ishmael to turn pro, with Roy acting as manager. Ishmael declines, explaining that he is from the local Amish community and that his bowling hobby is a secret. Roy then sees a poster in a bowling magazine advertising a $1 million winner-take-all tournament in Reno, Nevada. Learning that Ishmael's family is about to lose their farm to the bank, Roy eventually convinces Ishmael's family to let him join Roy.

Roy discovers that the childlike Ishmael is not aware of some of bowling's basic rules and skills. (His 270 average was because he was taught to bowl fifteen frames and not ten.) However, after some coaching, Ishmael improves. The duo earn money in various local tournaments and by hustling bowlers. Ishmael defeats a wealthy bowling enthusiast named Stanley Osmanski (Rob Moran), but Stanley attacks the duo after discovering that the roll of cash Roy put up was fake. As the group flee Osmanski's mansion, his girlfriend Claudia (Vanessa Angel), who had also been a victim of Osmanski's violence, joins them. Roy suspects Claudia has ulterior motives and is distracting Ishmael. After Roy gets in a big fight with her, Ishmael flees. During his absence, Roy and Claudia drive on and end up back in Roy's hometown, where Roy confesses he never returned for his father's funeral out of shame for his failure as a pro bowler. They eventually find Ishmael and continue on to Reno.

In Reno, the group runs into McCracken, who is now a national bowling superstar. McCracken insults and makes fun of Roy and infuriates Ishmael, who attempts to punch McCracken but instead hits a wall and breaks his hand, leaving him unable to bowl. Later on, Claudia disappears with all of their money after being discovered by Stanley. Feeling distraught, Ishmael convinces Roy that they still have a chance to win the $1,000,000 – if Roy bowls. Roy enters the tournament, rolling the ball with his prosthetic rubber hand. He wins his first several rounds, ending up in the televised finals against McCracken. During the final match, Ishmael's brother, who had been sent by the Boorg family, arrives and takes Ishmael back to Pennsylvania. When Roy realizes he is alone, he struggles and McCracken wins the tournament by one pin.

Afterwards, Roy is again living in Pennsylvania when he is visited by Claudia, who explains she had disappeared with Stanley in Reno to keep him from hurting Roy and Ishmael. She made Stanley believe she was running away with McCracken, and confesses her love for Roy, offering him money Stanley earned from gambling on McCracken in the finals. Roy responds that he has already earned $500,000 in an endorsement deal for Trojan condoms based on his prosthetic rubber hand. Roy and Claudia visit Ishmael's family home. Ishmael's parents explain that Roy and Claudia told them about Ishmael's forbidden bowling career, but also about the moral strength and decency he showed during his travels. Roy tells them how Ishmael straightened out Roy and Claudia's lives, with Roy shown to have finally given up drinking. Roy pays off the Boorg family's debts with his endorsement check, and Roy and Claudia drive away together.