Mookie is a 25-year-old pizza delivery man living in Bedford–Stuyvesant, Brooklyn, with his sister Jade (Joie Lee). He and his girlfriend Tina (Rosie Perez) have a toddler son named Hector. He works at the local pizzeria, and lacks ambition. Sal (Danny Aiello), the pizzeria’s Italian-American owner, has been in the neighborhood for 25 years. His older son Pino intensely dislikes black people, and does not get along with Mookie. Because of this, Pino is at odds with both his father, who refuses to leave the neighborhood, which is increasingly majority African-American, and his younger brother Vito, who is friendly with Mookie.
Many distinctive residents are introduced, including Da Mayor, a friendly drunk; Mother Sister (Ruby Dee), who watches the neighborhood from her brownstone; Radio Raheem, who blasts Public Enemy on his boombox wherever he goes; and Smiley, a mentally disabled man, who meanders around the neighborhood trying to sell hand-colored pictures of Malcolm X and Martin Luther King Jr.
While at Sal’s, Mookie’s friend Buggin’ Out, known for trouble-making and b-boying, questions Sal about his “Wall of Fame”, a wall decorated with photos of famous Italian-Americans. Buggin’ Out demands that Sal put up pictures of black celebrities since Sal’s pizzeria is in a black neighborhood. Sal replies that it is his business, and that he can have whoever he wants on “The Wall of Fame”. Buggin’ Out attempts to start a protest over the Wall of Fame. Only Radio Raheem and Smiley support him.
During the day, the heat and tensions begin to rise. The local teenagers open a fire hydrant and douse the street, before police officers intervene. Mookie and Pino begin arguing over race. Mookie confronts Pino about his negative attitudes towards African Americans, although the latter’s favorite celebrities are black. Various characters express flowery racial insults to the camera: Mookie against Italians, Pino against African Americans, Latino Stevie against Koreans, white police officer Gary Long against Puerto Ricans, and Korean store owner Sonny (Steve Park) against Jews. Pino and Sal talk about the neighborhood, with Pino expressing his contempt for African Americans, and Sal insisting that he is not leaving. Sal almost fires Mookie, but Jade intervenes, before Mookie confronts her for being too close to Sal.
That night, Buggin’ Out, Radio Raheem, and Smiley march into Sal’s and demand that Sal change the Wall of Fame. Raheem’s boombox is blaring and Sal demands that he turn it off, but he refuses. Buggin’ Out calls Sal and sons “guineas”, and threatens to close down the pizzeria until they change the Wall of Fame. Frustrated and angry after being called a “guinea bastard” and threatened by Buggin’ Out, Sal calls Buggin’ Out a “nigger” and destroys Raheem’s boombox with a baseball bat.
Raheem attacks Sal, leading to a violent fight that spills out into the street, and attracts a crowd. The brawl gets so bad, the police are called. While Raheem is choking Sal, the police arrive. They break up the fight and apprehend Raheem and Buggin’ Out. Despite the pleas of fellow officers and onlookers, one officer refuses to release his chokehold on Raheem, killing him. Realizing that Raheem has been killed in front of witnesses, the officers place his body in the back of a squad car and drive off, leaving Sal, Pino, and Vito unprotected.
The onlookers, enraged about Radio Raheem’s death, blame Sal and his sons. Mookie grabs a trash can and throws it through the window of Sal’s pizzeria, sparking the crowd to rush into the restaurant and destroy it. Smiley finally sets it on fire, diverting violent revenge against Sal. Da Mayor pulls Sal, Pino, and Vito out of the mob’s way. Firemen and riot patrols arrive to put out the fire and disperse the crowd. After police issue a warning, the firefighters turn their hoses on the rioters, leading to more fighting and arrests. Mookie and Jade sit on the curb, watching in disbelief. Smiley wanders back into the smoldering building and hangs one of his pictures on what is left of Sal’s Wall of Fame.
The next day, after an argument with Tina, Mookie returns to Sal. He feels that Mookie had betrayed him. Mookie demands his weekly pay, which leads to an argument. The two men cautiously reconcile, and Sal finally pays Mookie. Mister Señor Love Daddy, a local DJ, dedicates a song to Radio Raheem.
The film ends with two quotations that express different views about violence, one by Martin Luther King and one by Malcolm X. It fades to a photograph of the two leaders shaking hands. Prior to the credits, Lee dedicates the film to the families of six victims of police brutality or racial violence: Eleanor Bumpurs, Michael Griffith, Arthur Miller, Jr., Edmund Perry, Yvonne Smallwood, and Michael Stewart.