The film starts with the Polaroid photograph of a dead man. As the sequence plays backwards, the photo reverts to its undeveloped state, entering the camera before the man is shot in the head. The film then continues, alternating between black and white and color sequences.
The black and white sequences begin with Leonard Shelby, an insurance investigator, in a motel room speaking to an unseen and unknown caller. Leonard has anterograde amnesia and is unable to store recent memories, the result of an attack by two men. Leonard explains that he killed the attacker who raped and strangled his wife, but a second clubbed him and escaped. The police did not accept that there was a second attacker, but Leonard believes the attacker’s name is John or James, with a last name starting with G. So, Leonard conducts his own investigation using a convoluted system of notes, Polaroid photos, and tattoos. From his occupation in the insurance industry, Leonard recalls a fellow anterograde amnesiac, Sammy Jankis. Sammy’s diabetic wife, who wasn’t sure if his condition was genuine, repeatedly requested Sammy’s assistance with her insulin shots; she hoped he would remember having already given her an injection and would stop himself from giving her another before she died of an overdose. However, Sammy continues to administer the injections, and his wife falls into a fatal coma.
The color sequences are shown reverse-chronologically. In the story’s chronology, Leonard self-directively gets a tattoo of John G’s license plate. Finding a note in his clothes, he meets Natalie, a bartender who resents Leonard because he wears the clothes and drives the car of her boyfriend, Jimmy Grantz. After understanding Leonard’s condition, she uses it to get Leonard to drive a man named Dodd out of town and offers to run the license plate as a favor. Meanwhile, Leonard meets with a contact, Teddy, who helps with Dodd, but warns about Natalie. However, a photograph causes Leonard not to trust Teddy. Natalie provides Leonard with the driver’s license for a John Edward Gammell, Teddy’s full name. Confirming Leonard’s information on “John G” and his warnings, Leonard drives Teddy to an abandoned building, leading to the opening, where he shoots him.
In the final black-and-white sequence, prompted by the caller, Leonard meets with Teddy, an undercover officer, who has found Leonard’s “John G,” Jimmy, and directs Leonard to the abandoned building. When Jimmy arrives, Leonard strangles him fatally and takes a Polaroid photo of the body. As the photo develops, the black-and-white transitions to the final color sequence. Leonard swaps clothes with Jimmy, hearing him whisper “Sammy.” As Leonard has only told Sammy’s story to those he has met, he suddenly doubts Jimmy’s role. Teddy arrives and asserts that Jimmy was John G, but when Leonard is undeterred, Teddy reveals that he helped him kill the real attacker a year ago, and he has been using Leonard ever since. Teddy points out that since the name “John G” is common, Leonard will cyclically forget and begin again and that even Teddy himself has a “John G” name. Further, Teddy claims that Sammy’s story is Leonard’s own story, a memory Leonard has repressed to escape guilt (referencing an earlier black-and-white scene where Sammy is replaced by Leonard for a split-second as he sits in the asylum).
After hearing Teddy confess all of this, Leonard burns the photograph of dead Jimmy and monologues that he is willing to lie to himself in order to get justice against anyone who has wronged him. He therefore targets Teddy by ordering a tattoo of Teddy’s license plate number and writing a note to himself that Teddy is not to be trusted so that he will mistake Teddy for John G. and kill him. Leonard drives off in Jimmy’s car, confident that, despite this lie, he will retain enough awareness of the world to know that his actions have consequences.