Sheryl Hoover is an overworked mother of two living in Albuquerque, New Mexico. Her gay brother, Frank, an unemployed scholar of Proust, is temporarily living with the family after having attempted suicide. Sheryl’s husband Richard is a Type A personality striving to build a career as a motivational speaker and life coach. Dwayne, Sheryl’s son from a previous marriage, is a Nietzsche-reading teenager who has taken a vow of silence until he can accomplish his dream of becoming a fighter pilot. Richard’s foul-mouthed father, Edwin, recently evicted from a retirement home for snorting heroin, lives with the family. Olive, the daughter of Richard and Sheryl and the youngest of the Hoover family, is an aspiring beauty queen who is coached by Grandpa.
Olive learns she has qualified for the “Little Miss Sunshine” beauty pageant, being held in Redondo Beach, California in two days. Her parents and Grandpa want to support her, and Frank and Dwayne cannot be left alone, so the whole family goes. Because they have little money, they go on an 800-mile road trip in their yellow Volkswagen van.
Family tensions play out along the way, amidst the aging van’s mechanical problems. When the van breaks down early on, the family learns that they must push the van until it is moving at about 20 mph before it is put into gear, at which point they have to run up to the side door and jump in. Later on, the van’s horn starts honking unceasingly by itself, which leads to the family being pulled over by a state trooper.
Throughout the road trip, the family suffers numerous personal setbacks and discover their need for each other’s support. Richard loses an important contract that would have jump-started his motivational business. Frank encounters the ex-boyfriend who, in leaving him for an academic rival, had prompted his suicide attempt. Edwin dies from a heroin overdose, resulting in the family smuggling the body out of a hospital and nearly having it discovered by the police. During the final leg of the trip, Dwayne discovers that he is color blind, which means he cannot become a pilot, prompting him to finally break his silence and shout his anger and disdain for his family. Olive calms him with a hug, and he immediately apologizes.
After a frantic race against the clock, the family arrives at the pageant hotel, and are curtly told by a pageant organizer that they are a few minutes past the deadline. A sympathetic hired hand instead offers to register Olive on his own time. As Olive prepares for the pageant, the family sees Olive’s competition: slim, hypersexualized pre-teen girls with teased hair and capped teeth, performing highly elaborate dance numbers with great panache. It becomes apparent that Olive is an amateur by comparison.
As Olive’s turn to perform in the talent portion draws near, Richard and Dwayne recognize that Olive is certain to be humiliated, and wanting to spare her feelings, run to the dressing room to talk her out of performing. Sheryl, however, insists that they “let Olive be Olive”, and Olive goes on stage. Olive’s hitherto-unrevealed dance that Grandpa had choreographed for her is performed to Rick James’ song “Super Freak”. Despite the other kids being hypersexualized, Olive’s burlesque performance scandalizes and horrifies most of the audience and pageant judges. The organizers are enraged and demand Sheryl and Richard remove Olive from the stage. Instead of removing her, one by one, the members of the Hoover family join Olive, dancing alongside her to show their support. The family completes the dance to a shocked and silent audience, save for a pageant-hating sound technician who claps enthusiastically.
The family is next seen outside the hotel’s security office where they are given their freedom on the condition that Olive never enters a beauty pageant in California ever again. Piling into the van with the horn still honking, they happily smash through the barrier of the hotel’s toll booth and begin their trip home to Albuquerque.