A school teacher of history, Rainer Wenger, is forced to teach a class on autocracy, despite being an anarchist. When his students, third generation after the Second World War, do not believe that a dictatorship could be established in modern Germany, he starts an experiment to demonstrate how easily the masses can be manipulated. He begins by demanding that all students address him as “Herr Wenger”, as opposed to Rainer, and places students with poor grades beside students with good grades—purportedly so they can learn from one another and become better as a whole. When speaking, they must stand and give short, direct answers. Wenger shows his students the effect of marching together in the same rhythm, motivating them by suggesting that they could really annoy the anarchy class, which is below them. Wenger suggests a uniform, to remove class distinction and further unite the group. Mona argues it will remove individuality, as well. Karo shows up to class without the uniform and is ostracized. The students decide among themselves they need a name, deciding on “Die Welle” (The Wave). Karo suggests another name, which ends up with one single vote cast by herself.
The group is shown to grow closer and the bully Sinan is shown to reform, protecting a classmate from other bullies. He also creates a distinctive logo for the group, while Bomber creates a salute. Karo and Mona protest the actions of the group, and Mona, disgusted with how her classmates are embracing fascism, leaves the project group. The other classmates don’t see her departure as a connection with fascism and continue attending. The members of The Wave begin spray-painting their logo around town at night, having parties where only Wave members are allowed to attend, and ostracizing and tormenting anyone not in their group. Tim becomes very attached to the group, having finally become an accepted member of a social group. He burns his brand clothes, after a discussion about how large corporations do not take responsibility for their actions.
A pair of punks start a fight with Tim, but he is saved by Bomber and Sinan and starts to bond with them. When Tim and his group of new friends are confronted by a group of angry punks (including those that Tim faced previously), Tim pulls a Walther PP pistol, causing them to back down. Tim explains to his shocked friends that the pistol only fires blanks. Tim later shows up at Wenger’s house, offering to be his bodyguard. Wenger declines his offer but invites Tim in for dinner. This puts further strain on Wenger’s already tense relationship with his wife, Anke, who thinks his experiment has gone too far. Wenger finally ejects Tim from his house, only to find in the morning that the boy had slept on his doorstep. Anke is upset upon learning of this, and tells Wenger to stop the experiment immediately. He accuses her of being jealous and insults her dependency on pills to be able to show up to work. Shocked, she leaves him, saying The Wave has made him a bad person.
Karo continues her opposition to The Wave, earning the anger of many in the group, who ask her boyfriend, Marco, to do something about it. A water polo competition is due that day, and Wenger asks The Wave to show up in support of the team. Karo and Mona, denied entry to the competition by members of The Wave, sneak in another way to distribute anti-Wave fliers. Members of The Wave notice this and scramble to retrieve the papers before anybody reads them. In the chaos, Sinan starts a fight with an opposing team member, the two almost drowning each other. Members of The Wave in the stands begin to violently shove one another. After the match, Marco confronts Karo and accuses her of causing the fight. She replies that The Wave has brainwashed him completely, and he slaps Karo, causing her to get a nosebleed. Unsettled by his own behavior, Marco approaches Wenger and asks him to stop the project. Wenger agrees and calls a rally for The Wave members for the following day in the school’s auditorium.
Once in the rally, Wenger has the doors locked and begins whipping the students into a fervor. When Marco protests, Wenger calls him a traitor and orders the students to bring him to the stage for punishment. Wenger uses this to test the students to see how extreme the Wave has become. Wenger declares he is disbanding the Wave, but Dennis argues that they should try to salvage the good parts of the movement. Wenger points out that there is no way to remove the negative elements from fascism. Tim draws a gun and refuses to accept the Wave is over, fearing that he will once more be lonely and states that the Wave is his life. When Bomber says the gun only fires blanks, Tim shoots him to prove the pistol has live rounds. Wenger tries to calm Tim, who is now aiming the gun at him. When Tim demands why he shouldn’t shoot Wenger too, Wenger says that without him, there would be no one to lead The Wave. Tim abruptly shoots himself instead, preferring to commit suicide rather than go on living without The Wave. Wenger cradles his corpse and looks helplessly at his now traumatized students. The film ends with Wenger being arrested by the police and driven away, Bomber being taken away to the hospital, and Marco and Karo being re-united. The final images show Wenger in the back of a police car, staring into the camera overcome with distress.