A commercial depicts rapper Alpa Chino (Brandon T. Jackson) promoting his two brands: the "Booty Sweat" energy drink and "Bust-A-Nut" candy bar, while performing his hit song, "I Love Tha' Pussy". The first trailer shows action star Tugg Speedman's (Ben Stiller) latest film, 'Scorcher VI: Global Meltdown', a film so repetitive of it's five predecessors that even the trailer narrator sounds shaky about it. Another trailer features funnyman Jeff "Fatty" Portnoy (Jack Black), playing the entirety of "America's favorite obese family" in the highly flautlent 'The Fatties: Fart 2'. The final trailer, entitled 'Satan's Alley', features Australian "five-time Oscar winner" Kirk Lazarus (Robert Downey Jr.) and Tobey Maguire (as himself) as two monks who begin an empassioned affair.
We are taken, via the narration of John "Four Leaf" Tayback (Nick Nolte), into a gruesome battle of the Vietnam War. This is actually a scene from 'Tropic Thunder', a big budget adaptation of Tayback's wartime memoir. Starring as the central platoon are Speedman, Lazarus, Chino and Portnoy, as well as young character actor Kevin Sandusky (Jay Baruchel). To play his character, Sgt. Osiris, an African American, Lazarus has dyed his skin dark and refuses to break character from Osiris. A take of Osiris crying over Tayback's (played by Speedman) blown-off hands is ruined when Speedman is unable to cry and Lazarus dribbles uncontrollably into Speedman's face. This causes great frustration for the film's director, Damien Cockburn (Steve Coogan). The chaos is further exacerbated when the film's pyrotechnics expert, Cody (Danny R. McBride), mistakes Cockburn's conniptions for a go to set off several expensive explosions.
We learn, via Access Hollywood, that Speedman's career has been on a downward spiral. In an attempt at Oscar-bait, Speedman had played the "retard" title character in the flop, 'Simple Jack', apparently considered one of the worst films of all time. Much to the horror of Speedman's agent, Rick "Pecker" Peck (Matthew McConaughey), Speedman doesn't even have TiVO on location. Elsewhere, Cockburn is berated in a meeting, via satellite TV, by studio head, Les Grossman (Tom Cruise). With filming a month behind schedule only five days into shooting, the media has dubbed the production "the most expensive war movie never made". Cockburn tries to explain that the primadonna stars are what's dragging the production down, but Grossman is not sympathetic. Later, the real "Four-Leaf" Tayback, takes Cockburn aside and suggests that he drop the actors in a real jungle and use Cody's explosive to inspire real fear in them. Cockburn enthusiastically agrees.
Speedman, Lazarus, Chino, Portnoy and Sandusky are dropped off with Cockburn in the middle of the jungle who sternly explains that he's going to use hidden cameras ("guerrilla-style") to capture real fear as they survive the real jungle. The actors are only given a map and a scene listing to guide them to the helicopter waiting at the end of the jungle. Just as he walks away, Cockburn is blown to pieces by an old landmine. The actors, with the exception of Lazarus, are convinced that this is some of Cockburn's special effects trickery. Unbeknownst to the actors, they were dropped in the middle of the Golden Triangle, the home of the heroin-producing Flaming Dragon gang. The Dragons believe the actors to be DEA agents and are put off to see Speedman, trying to convince the others that Cockburn's death is a trick, doing a gruesome display with Cockburn's severed head. Believing the Dragons to be actors playing Vietcong, the actors engage them in a gunfight (though the actors only have blank rounds). Tayback and Cody, waiting on a nearby ridge and unaware of the real dangers below, blow a large explosive that causes the Dragons to retreat. After the "fight scene", the actors continue into the jungle to continue the "shoot". Tayback and Cody attempt to locate the now-deceased director. As the two argue and struggle (it is revealed that Tayback still has hands), they are surrounded and captured by the Dragons.
The actors continue their rigorous trek through the jungle. It is revealed that Portnoy is a heroin addict, a drug which he disguises from the others as candy. One night, a bat swoops down and steals Portnoy's heroin. Speedman and Lazarus clash as Speedman insists on holding the map and continuing to do scenes. Lazarus berates Speedman for his acting in 'Simple Jack'. Meanwhile, Chino grows angry at Lazarus for continuing to offensively "act black" as he stays in character. After Lazarus steals the map from Speedman, Sandusky (the only one with boot camp training) reveals by looking at the map that Speedman has been leading them the wrong way the whole time. The group splits from Speedman, who insists on continuing on his way. In captivity, Tayback reveals to Cody that he has never left the U.S. before, and originally wrote the book as a tribute.
Speedman's sanity seems to be slipping as he continues to act scenes from the film and even, much to his own distress, kills a Giant Panda one night. Speedman is soon captured by the Dragons and taken back to their camp. When he is tormented by the gang's prepubescent leader, Speedman stutters and is soon recognized as the star of 'Simple Jack'. This turns out to be the only film the Dragons have seen and they are in awe. The force Speedman to perform the film many times a day. Speedman even gets a young hanger-on, a "son" of sorts. The Dragons call Peck, Speedman's agent, and explain that they are holding Speedman ransom. Peck brings this to Les Grossman, who rabidly curses at the Dragon on the other end of the line. He later tells Peck that they can benefit more by collecting the insurance claim on Speedman's death, offering the torn agent a share of the profits.
Meanwhile, among the actors, tension grows between Lazarus and Chino. Portnoy has begun to hallucinate due to his withdrawal, and has to be tied to a water buffalo and then, at his own insistance, a concrete column. Soon, Portnoy is pleading with others to untie him. During a conversation about women "back home", Sandusky expresses envy of Lazarus having dated Jennifer Love Hewitt. In the course of the conversation, Chino is revealed to be a closet homosexual (he is in love with someone named "Lance"). They soon stumble upon the Flaming Dragon's heroin factory. After seeing Speedman being tortured, they plan an ambush based on the film's plot line.
Lazarus impersonates a farmer who has caught Portnoy (again tied to his water buffalo) in his farm, distracting the armed guards as Chino and Sandusky sneak into the building the captives are held in. After the gang notices inconsistencies in Lazarus' story, the actors open fire on the gang, temporarily subduing them despite being armed with only special effects blanks. Portnoy kidnaps the gang's child leader from the fray in order to be led to the drugs. After barely defeating the young crime lord in combat, he finds an enormous mound of heroin; however, reflecting upon his failing low-brow movie career, he rejects the heroin and uses it instead to knock out two guards. Tayback and Cody join the fighting, using Cody's flamethrower and explosives against the Dragons.
However, Portnoy, Chino, and Lazarus find Speedman brainwashed. After he's performing to an approving crowd several times a day, he now believes he is home. Before they can snap him out of it, Lazarus breaks down, revealing his similar inner-struggle with his own identity. With Chino and Sandusky's help, Lazarus drops the Sgt. Osiris character, in both make-up and accent, and becomes his Australian self. However, even Sandusky's inspiring words cannot break Speedman's trance and they have to drag him away as they attempt to escape in Cody and Tayback's recaptured helicopter. The Dragons quickly rejoin, chasing the actors across a bridge which is rigged to detonate by Cody. Speedman asks to remain behind with his "family", but quickly returns with his "son" stabbing him in the neck and the murderous Dragons in pursuit. Tayback detonates the bridge just in time for Speedman to get across. Lazarus goes to rescue Speedman from the rubble. They swear each other's friendship and Speedman is finally able to cry. However, just as they get in with the others to the helicopter, the prepubescent Dragon leader appears with a rocket launcher. As he shoots at the helicopter, Speedman's agent "Pecker" inexpicably appears with Speedman's TiVO and deflects the rocket with it.
A documentary of the botched production is made from the hidden camera footage, and results in a multiple Academy Award-winning blockbuster film. The film breaks Speedman's streak of flops and he wins the award for Best Actor, presented by his friend Lazarus. Along with Portnoy, Sandusky is present with Jennifer Love Hewitt on his arm and Chino is present with Lance Bass (the "Lance" of earlier) on his arm. Len Grossman does a hip-hop dance in celebration of the hit.