Barbara and Adam Maitland decide to spend their vacation decorating their idyllic Connecticut country home. Barbara’s cousin Jane Butterfield, a pushy real estate agent, hounds them with purchase offers that she solicits against their will. As the two are driving home from a trip to town, Barbara swerves to avoid a dog and the car plunges into a river.
After they return home, Adam decides to retrace their steps as they cannot recall how they got home. Upon stepping outside, he is taken to a desert world with monstrous sandworms before being pulled back in by Barbara. Even though he had been gone for less than a minute, Barbara claims he had been gone for two hours. She and Adam notice that they now lack reflections in mirrors and they discover a Handbook for the Recently Deceased and realize they were killed in the crash.
Jane immediately sells the house to the Deetz family, from New York City. Charles Deetz is a former real estate developer; his wife Delia, a sculptor; and his teenage goth daughter Lydia, from his first marriage, who is an aspiring photographer. Under the guidance of interior designer Otho, Delia begins to transform the house into a posh modern art piece. Consulting the Handbook, the Maitlands travel to a netherworld waiting room populated by other distressed souls, where they discover that the afterlife is structured according to a complex bureaucracy involving vouchers and the usual overworked caseworkers. The Maitlands’ own caseworker, Juno, informs them that they must remain in the house for 125 years. If they want the Deetzes out of the house, it is up to them to scare them away. Barbara’s and Adam’s attempts at scaring the family prove counterproductive, despite their ability to shape-shift into monsters, as nobody can see or hear them.
While the Maitlands are away seeing Juno, Lydia discovers the handbook and reads it. 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 (pronounced Beetlejuice), Juno’s former assistant and now freelance “bio-exorcist” ghost, to scare away the Deetzes. However, Betelgeuse quickly offends the Maitlands with his crude and morbid demeanor; and they reconsider hiring him, and instead attempt themselves to wreak havoc during a small dinner party, when the Deetzes have invited Delia’s agent, Bernard, along with Otho and other friends. However, the living are only intrigued by the turn of events.
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, but they begin to decay, as Otho had unwittingly performed an exorcism instead. Horrified, Lydia begrudgingly summons Betelgeuse for help; but he agrees to help her only on the condition that she marry him, enabling him to freely cause chaos in the mortal world. Betelgeuse 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. Adam, Barbara and Lydia are seen in a remodeled part of the house dancing to Harry Belafonte’s “Jump in the Line” (with Lydia floating in the air) to celebrate Lydia getting an “A” on her math test. Charles is in the den reading a book called, “The Living and the Dead,” (by the authors of “Handbook for the Recently Deceased”) a manual on how the living and the dead can co-exist. Meanwhile, Betelgeuse is stuck in the afterlife waiting room; there, he attempts to cut in front of a witch doctor, who shrinks his head in retaliation. However, being Betelgeuse, he remains upbeat: “This might be a good look for me”.