In 1880 in Big Whiskey, Wyoming, two cowboys—Quick Mike and “Davey-Boy” Bunting—attack and disfigure prostitute Delilah Fitzgerald with a knife after she laughs at Quick Mike’s small penis. As punishment, local sheriff “Little Bill” Daggett orders the cowboys to bring several horses as compensation for the brothel owner, Skinny Dubois. The rest of the prostitutes are outraged by the sheriff’s decision, and offer a $1,000 reward to anyone who kills the cowboys.
In Hodgeman County, Kansas, a boastful young man calling himself the “Schofield Kid” visits the pig farm of William Munny, seeking to recruit him to help kill the cowboys and claim the reward. In his youth, Munny was a notorious outlaw and murderer, but he is now a repentant widower raising two children. After initially refusing to help, Munny recognizes that his farm is failing and jeopardizing his children’s future, so he reconsiders. Munny recruits his friend Ned Logan, another retired outlaw, and they catch up with the Kid.
Back in Wyoming, British-born gunfighter “English Bob”, an old acquaintance and rival of Little Bill, is also seeking the reward. He arrives in Big Whiskey with biographer W. W. Beauchamp, who naively believes Bob’s exaggerated tales of his exploits. Enforcing the town’s anti-gun law, Little Bill and his deputies disarm Bob and Bill beats him savagely, hoping to discourage other would-be assassins from attempting to claim the bounty. Bill ejects Bob from town the next morning, but Beauchamp decides to stay and write about Bill, who debunks many of the romantic notions Beauchamp has about the wild west.
Munny, Logan, and the Kid arrive in town during a rainstorm, and head into the saloon. While Logan and the Kid meet with the prostitutes upstairs, a feverish Munny is sitting alone in the saloon when Little Bill and his deputies confront him. Not realizing Munny’s identity, Bill beats him up and kicks him out of the saloon for carrying a pistol. Logan and the Kid escape through a back window, and the three regroup at a barn outside town, where they nurse Munny back to health.
A few days later, the trio ambush and kill Bunting in front of his friends. Logan, who wounded Bunting but lost his nerve while attempting to finish him off, resolves to return home; Munny feels they must finish the job and does so using Logan’s rifle. Munny and the Kid then head towards the cowboys’ ranch, where the Kid ambushes Quick Mike in an outhouse and kills him. After they escape, a distraught Kid confesses he had never killed anyone before and renounces life as a gunfighter. When one of the prostitutes arrives to give them the reward, they learn that Logan had been captured and tortured to death by Bill, but not before revealing Munny’s identity. The Kid heads back to Kansas with the reward; Munny heads back to Big Whiskey to take revenge on Little Bill.
That night, Munny arrives and sees Logan’s corpse displayed in a coffin outside the saloon with a sign warning this is what happens to assassins in the town of Big Whiskey. Inside, Little Bill has assembled a posse to pursue Munny and the Kid. Munny walks in alone to confront the posse and kills Dubois. In the ensuing shootout, Munny shoots Bill and kills several of his deputies before ordering the bystanders to leave the saloon. Critically wounded, Bill promises to see Munny in hell before Munny executes him. Munny then leaves Big Whiskey, warning the townsfolk that he will return for more vengeance if Logan is not buried properly or if any of the prostitutes are harmed.
During the epilogue, a title card states that Munny left the pig farm with his children and is rumored to have moved to San Francisco, prospering in dry goods.