The protagonist, Melvin Udall (Jack Nicholson) is a cranky, bigoted, intelligent, wealthy writer suffering from obsessive-compulsive disorder (OCD). As you may know, people suffering from OCD feel compelled to engage in sometimes-unusual rituals and repetitive behaviors. If they do not follow through on these compulsions, they become filled with anxiety and become obsessed with returning to their familiar rituals in order to reduce their anxiety. It is important to understand the comfort that familiar rituals bring to an OCD person, and (when wrenched outside of these familiar routines) the obsession he has to return to them. Melvin seems to have had his antisocial OCD behaviors his whole life, since his social skills are atrocious, and he has approximately no empathy for other people. The entire movie is centered around these compulsions. You will see how Melvin engages in obvious (for an OCD person), selfish actions for the purpose of returning to familiar rituals, while normal people around him see those actions as generous or manipulative behavior. This dichotomy is repeated throughout the movie.

Melvin lives in a nice apartment, on an upper floor. He is happy with his life, and spends most of his time inside his apartment, writing books. Fortunately for Melvin, his books are popular, for a reason that later becomes clear. He is working on his sixty-sixth book.

Melvin finds himself bothered by Verdell (Jill the Dog), a small terrier owned by neighbor Simon Bishop (Greg Kinnear). Simon is an artistic painter living on the same floor. Simon is homosexual and somehat passive. Simon has a good friend, Frank Sachs (Cuba Gooding Jr.), who is black and rather aggressive.

Verdell escapes Simon's apartment, and runs around the hallway, annoying Melvin. Melvin comes out and tries to calm Verdell down. But Verdell stays out of reach, and further annoys Melvin by trying to pee by the wall. Finally, Melvin grabs Verdell and stuffs him down the laundry chute. Relief! Melvin can get back to his comfortable routine! Just as Melvin is about to open the door to his apartment, Simon comes out and asks about Verdell. Naturally, Melvin's highest priority is to get back to his comfortable routine, so he lies and says he knows nothing about Verdell.

Simon is suspicious, but has to leave to answer an urgent phone call. He is having an exhibition of his paintings that evening, and has to see to final arrangements. Melvin naturally disappears into his apartment.

At Simon's exhibition that evening, a friend walks up carrying Verdell. Simon is overjoyed to see Verdell. Their reunion is joyful and happy, with Verdell excited and licking Simon's face. Simon is so happy to see Verdell he lets Verdell continue to lick his face. Simon asks his friend where he found Verdell. His friend says, "In the dumpster, licking poop from baby diapers." Oops! No more face-licking for Verdell!

Frank realizes what happened, and confronts Melvin about Verdell, verbally abusing him, but saying he won't tell Simon and that Melvin "owes him one".

In the morning, Melvin goes out for his daily breakfast ritual. He walks to a particular nearby cafe. He sits at a particular table (and if other people are sitting there, he insults them until they leave). He insists on being served by a particular waitress, Carol Connelly (Helen Hunt). Now, most people may think that if a man insists on being served every day by the same waitress then the man has some kind of feelings toward her. But we know, since Melvin is OCD, that Carol is simply part of the ritual, along with that particular table and that particular cafe. Also part of the morning ritual is bringing his own plastic utensils.

Melvin happily continues is daily rituals. Then one morning, Carol does not show up to serve him his breakfast! Melvin is naturally very upset, so he proceeds in a very OCD-logical manner, by insulting the substitute waitress and telling the manager to get Carol. The manager throws him out. On the way out, Melvin bribes a busboy to get Carol's last name. Melvin uses that to find out where Carol lives.

Melvin tries to restore his daily morning ritual, so he goes to Carol's apartment. Carol is of course surprised to see him. Melvin demands that she come back to the cafe and serve him breakfast. Carol says she cannot. Her son, Spencer (Jesse James), has congestion in his lungs so severe he can barely breathe. While there, Spencer's condition gets worse, and Carol leaves to take Spencer to the emergency room at the hospital, yet again. Carol and Spencer get in the cab that brought Melvin, and Melvin hops in the front seat.

At the hospital, Melvin sees how terrible this is for Spencer, and how much a preoccupation Spencer's condition is for Carol. You or I might feel compassion for Spencer and empathy for Carol. But not OCD Melvin. He sees Spencer's condition as a powerful motive for Carol sometimes not serving him breakfast!

Melvin takes steps to bring back his normal daily routine. It happens that Melvin's editor has a brother, Martin Bettes (Harold Ramis), who is a medical doctor. Melvin convinces his editor that her brother should see Spencer. As Melvin leaves her office, the secretary (who was thrilled to see her favorite author) insists on knowing Melvin's secret of connecting so well with women. He turns, says, "I think of them as men, but take away their reason and logic." Then he leaves. The secretary is stunned.

Carol comes home to see a nice car with 'MD' license plates parked in front of her apartment. Fearing something terrible has happened to Spencer, she rushes in, only to find Spencer and Carol's mother, Beverly Connelly (Shirley Knight) pleasantly visiting with Dr. Bettes. Dr. Bettes asks Carol about what tests have been performed on Spencer, finding out that minimal emergency room tests have been done---no allergy tests, for example. Dr. Bettes orders some tests for Spencer, and tells the lab he wants the results later that day. One of the adults asks incredulously, "Do you really expect the results today???" Dr. Bettes says, "Yes." He says he does not know now exactly what is wrong with Spencer, but he guarantees that Spencer will be feeling a lot better from now on. He gives Carol his business card, tells her it has his home phone number, and tells her to phone him if she has any concerns. Carol is overwhelmed. She assures Dr. Bettes that she is extremely grateful, and will do everything she can do to pay for his services. Dr. Bettes tells her that Melvin will be paying all the bills. Carol is shocked.

That night, Carol cannot get to sleep. She is trying to understand everything that happened. Why would Melvin spend a lot of money to help Spencer get better??? Of course we know the answer---Melvin desperately wants to return to his comfortable daily rituals, and spending money he does not need is the most obvious solution. But this thought does not enter Carol's head. She finally concludes that the only rational reason a man she barely knows would spend that kind of money on her behalf is to have sex with her.

So Carol runs out into the pouring rain clad only in a T-shirt, pants, and shoes. She grabs a bus and goes to Melvin's aparment. She bangs on the door, and waits. Well, you know what pouring rain does to a woman's T-shirt. At the last moment, Carol realizes it, too, as Melvin opens the door. She grabs the front of her T-shirt, striving for some degree of modesty. She blurts out that she knows why Melvin was spending all that money on her son, but that it is not going to work---she will never, never, never have sex with him.

Melvin is flabbergasted. The thought of having sex with Carol had never entered his mind. He was only concerned with returning to his comfortable daily routine. Carol leaves. But now the thought has entered his mind, and percolates there.

Meanwhile, Frank has recruited a young man from a small ne'er-do-well gang as a model for Simon. The young man thinks he is going to pose nude, and starts shedding his clothes. Simon stops him. After modeling some natural poses, Simon finds one he likes, and proceeds to sketch him.

They fall into a daily routine. The young man comes over, poses, and Simon sketches or paints him (always fully clothed). After a few weeks, while Simon is painting a portrait of the young man, the young man's gang sneaks into the apartment and starts stealing things. Verdell alerts to them and Simon confronts the intruders. The gang, perhaps thinking Simon is homosexually abusing the young man, brutally beats Simon, despite the young man's protests.

Simon winds up in the hospital. He is severely injured. His face looks like the face of Frankenstein's monster. Frank has to find a dog-sitter for Verdell, so he tries the neighbors. Finally, Frank remembers that Melvin "owes him one", and persuades Melvin to take Verdell.

Surprisingly, Verdell takes a liking to Melvin, and Melvin responds by feeding Verdell bacon and other treats. When Melvin goes out walking, he is very careful to never step on a crack. Eventually Verdell follows suit, deliberately hopping over cracks. Melvin is thrilled. They settle into a routine where Melvin works on his computer while Verdell keeps him company on a cushion next to him, as well as walking the dog to breakfast. This is such a comfortable routine for Melvin that he quickly finishes is sixth-sixth book. Life is going great for Melvin!

After a few weeks, Simon comes home from the hospital and insists on taking Verdell back. Melvin is heartbroken, but is cheered up when Simon asks Melvin to take Verdell for a daily walk.

It turns out Simon has no medical insurance. He has to spend all his money on hospital bills. His exhibition was a flop. He has no income. He cannot bring himself to resume working. He is very depressed. He has a list of friends he calls on for a loan, but they all turn him down. His last resort is to ask his estranged parents for money, but they never answer the phone, and live far away near Baltimore.

Frank approaches Melvin, asking Melvin to drive Simon to Baltimore, while Frank stays and cares for Verdell. Simon resists. But eventually Simon succumbs, perhaps figuring that if Simon loses his apartment then Simon and Verdell will move away, and Melvin will no longer see his new-found friend, Verdell. Frank offers his convertible for the drive.

Melvin is too uncomfortable to go on that trip by himself, so he grabs some comfortable familiarity by convincing Carol to go with them (staying in separate rooms), using the leverage that since he helped Spencer, Carol should help him. Carol reluctantly gives in.

The three of them leave on the road trip. They finally arrive near Baltimore late in the evening, and check into their hotel, into a three-bedroom suite. Carol phones home. She finds out that Spencer had played in his first soccer game, and had scored his first goal. Carol is thrilled! She wants to celebrate, with someone. She tries to get Simon to go out with her, but he firmly refuses. So Carol informs Melvin that he is her date.

While Melvin takes a shower, Carol quickly gets dressed, in a pretty red dress with small white polka dots. Carol waits for Melvin to get out of the shower. And waits. And waits. And waits. After a long time, Melvin finishes, and actually looks rather spiffy.

They go off to a nice restaurant. Unfortunately, the maitre d insists that Melvin wear a suitcoat and tie, but reassures him that he has some he is willing to lend to Melvin. He brings one out. Melvin is skeptical. Carol says, "You dry clean those each time, right?" The maitre d says, "No." That does it for Melvin, after seating Carol he runs to a nearby haberdashery, buys a suitcoat and tie, and comes running back.

As they are being seated, Melvin complains that he has to wear a suitcoat and tie, while they let Carol in with an ordinary housedress. Carol is very offended. She insists that Melvin sincerely apologize, or she will leave. Melvin says he is sorry. Carol says that the way to make that sincere is to pay her a sincere compliment. This is clearly a struggle for Melvin, as he so rarely thinks positively about anyone. Eventually he says that when he is with her, she makes him want to be a better man. She is very flattered. This is the best compliment she has ever received. She becomes very attentive, moves over right next to him, within kissing range, and asks him why he really wanted her to come on the trip. She obviously hopes for some romantic reason. Instead, he mumbles and fumbles and finally says that one reason was he hoped she would have sex with Simon. She is furious! She immediately leaves him at the restaurant.

Carol goes back to the hotel. She walks into Simon's room---the one with a big bathtub---and informs him she is going to take a bath, even though Simon is sitting there in the room. She draws the water, gets undressed (out of sight), wraps herself with a large towel, and comes back in sight, sitting on the bathtub with her back to Simon.

As Carol is putting her hair up, she reaches a pose that Simon thinks is amazing. He tells her to hold the pose. At first reticent, she eventually loosens up, starting by dropping her towel a bit so Simon can see most of her bare back.

Hours later, Melvin comes back to the suite to find Carol lying naked on the bed with Simon drawing sketch after sketch of her. Jealous (perhaps a new experience for him), Melvin asks if she had sex with Simon. Carol says, "No. It was better than sex. He held me."

With his artistic spirit back, Simon is no longer depressed. He loves life. He phones his parents and---miracle of miracles---actually gets through. He tells his mother he is doing fine, would like to reconnect with them, but it does not have to be now. He hangs up, happy. He knows he might lose his apartment, but he is sure he will be able to cope.

They all go back to New York. While he was gone, he has lost his apartment. It turns out Melvin had told the landlord to move all of Simon's things into Melvin's spare bedroom. Simon comes and looks at the room, and is stupified both by how nice it is and by Melvin's willingness to let Simon live there (which we know is because Melvin wants Verdell around).

Simon talks Melvin into going after Carol. Melvin goes over to her apartment, and approaches her in his usual fumbling way. Carol resists, saying all she wants is a normal boyfriend. Carol's mother, who has been listening, comes out and says, "That's what we all want. But it never happens. No one has a normal boyfriend. Just be happy with him as a boyfriend" (or words to that effect). Carol reconsiders, and Melvin continues with Carol, even to the point of stepping on cracks to be with her!