The McCallister family prepares to spend Christmas with Peter and Frank’s brother Rob in Paris, France, and gather at the home of Peter (John Heard) and Kate (Catherine O'Hara) in Chicago the night before their flight. Eight-year-old Kevin, Peter and Kate’s youngest son and the main protagonist of the film, finds himself the subject of ridicule from the other children.
When Kevin’s older brother Buzz (Devin Ratray) secretly eats the last piece of Kevin’s cheese pizza and pretends to throw up on the floor, Kevin initially lets it go. But when Buzz does it again, Kevin loses his cool and pushes Buzz, causing milk (and soda) to spill on the counter and the airline tickets, and when Peter notices this, he causes the Pepsi to spill all over the table — much to the shock and anger of Frank McCallister (Gerry Bamman), who gets Pepsi spilled all over his pants.
Kevin is then sent to his third floor bedroom of the house as punishment, and wishes that his family would disappear. The family accidentally leaves Kevin asleep in bed, as a power outage resets the time and causes them to wake up late. A neighbor boy named Mitch Murphy is mistaken for Kevin in a headcount, and the family hastily departs to the Chicago O'Hare International Airport, for a flight to Paris-Orly Airport.
During the flight, Kate realizes that they have left Kevin behind, and once everyone is in Paris, she immediately tries to book a return flight back to Chicago.
Meanwhile, Kevin wakes up to find the house empty and is overjoyed to find that his wish came true. He gets away with taking Buzz’s life savings, practicing shooting Buzz’s BB gun, jumping on the bed, watching a gangster film that he is forbidden to watch, and eating a large amount of junk food, such as a big ice cream sundae.
However, Kevin finds himself scared by the appearance of a member of the Chicago Police Department (called by his parents to check on Kevin via payphone from Paris-Orly), his next door neighbor “Old Man” Marley (Roberts Blossom), who was rumored to have murdered his family many years earlier by Buzz, and the appearance of The Wet Bandits, Harry Lyme and Marv Merchants (Joe Pesci and Daniel Stern), who are breaking into the other vacant houses along the block.
The Wet Bandits are aware of which houses are vacant, as Harry impersonated a police officer doing wellness checks on families before the holidays.
Meanwhile, although able to fly into Dallas and Scranton, Kate discovers that the flight to Chicago was out of order. However, she does manage to hitch a ride with a man named Gus Polinski and his polka band, the Kenosha Kickers, who are driving to Milwaukee, as their flight was canceled in a blizzard.
On Christmas Eve, Kevin manages to overhear Harry and Marv discuss plans for breaking into his house that night.
That same evening, Kevin converses with a fake Santa Claus before heading into a church. There, while watching a local choir perform in hopes to have his family return, Kevin eventually encounters Marley, who sits with him. While they talk, Kevin realizes a few things about Marley: he is a nice man, a Christian, a father and grandfather, none of the rumors about him are true and his salting the sidewalks every night with a snow shovel is his job. Kevin further finds out that Marley has been estranged from his son for quite some time after an argument for an unknown reason many years before Kevin and his family moved next door, and suggests that he reunite with him for Christmas.
His own spirits lifted by encouraging Marley, Kevin returns home to prepare a series of booby traps about the house before 9:00 PM. Harry and Marv, who were initially fooled by Kevin’s illusions that the house is occupied, now realize that he is home alone and attempt to break in, running into the various traps. After the two spring almost every trap in the house, Kevin flees to the second floor of the house, and dials 9-1-1 from a landline.
Harry and Marv manage to chase Kevin out of the house. He then flees to the vacant neighboring home, which was unlocked and unoccupied. The Wet Bandits trap Kevin when he runs to the top of the stairs connecting the basement and the first floor. They decide to do the same things that Kevin did to them and Harry decides to bite Kevin’s fingers off one at a time first; Marley shows up, knocks them out with his snow shovel (thus saving Kevin’s life) and takes Kevin home. Shortly afterwards, Harry and Marv are arrested. Additionally, the police were aware of every house The Wet Bandits have hit because of Marv’s habit of leaving the household’s water running to leave their mark (which Harry did not like one bit).
Kevin then places some food and milk on a table, having set up Christmas all by himself. Meanwhile, Kate berates herself for being a bad parent, and Gus assures her that she is not, while also telling her about when he had left his son at a funeral parlor once.
The next morning, Kevin wakes up to find that his mother has returned, and they reconcile. Shortly afterward, the rest of the McCallisters arrive, having travelled directly to Chicago from Paris. Kevin and Buzz have a moment of reconciliation. When Kate suggests finding an open store, Kevin tells his family that he bought groceries and laundry supplies the previous day, which impresses Kate and Peter. Kevin manages to keep silent about his encounter with Harry and Marv (although Peter finds Harry’s missing gold tooth and wonders what it is).
Kevin then goes over to the window and discovers that Marley took his advice, and watches as he and his son reunite and reconcile, smiling. Marley looks up, sees Kevin and, smiling, waves to him as a sign of thanking him, and Kevin, also grinning, waves back. However, Buzz interrupts Kevin’s musings by calling out, “Kevin! What did you do to my room?!”
Immediately, Kevin runs off, and the film ends.