Jason Shepherd, portrayed by Frankie Muniz, is a 14-year-old who resides in the fictitious town of Greenbury, Michigan. Known for his relentless lying and con artist tendencies, Jason finds himself in hot water when his English teacher, Ms. Phyllis Caldwell (played by Sandra Oh), assigns the class a creative writing task. After failing to complete it, his parents are summoned to the school where Ms. Caldwell stresses the importance of submitting a handwritten story by 6 p.m. Undeterred, Jason recalls his father’s assertion that "making up stories appears to be his God-given talent." Seizing the moment of inspiration, he writes a story titled Big Fat Liar, drawing from his habitual deceitfulness.
Once he finishes, Jason hops onto his older sister's vintage bicycle, inadvertently crashing into the luxury limousine of the arrogant Hollywood producer Marty Wolf, interpreted by Paul Giamatti. Seizing this unexpected opportunity, Jason blackmails Wolf into giving him a lift to school. During this ride, Wolf unearths his own history as a liar and con artist, albeit of a more polished caliber than Jason. However, when they reach the college, Jason rushes out without realizing he’s left behind his newly penned story. Although Wolf attempts to return it, he assesses its quality and opts to claim it as his own.
Upon realization that he no longer has his story, Jason is met with disbelief from both his parents and Ms. Caldwell, which leads to a summer school assignment being imposed on him. With the assistance of his best friend Kaylee, portrayed by Amanda Bynes, they uncover that Wolf has plagiarized his work by transforming it into a film named Big Fat Liar. With Jason's family away on a summer vacation, he and Kaylee decide to use their savings to fly to Los Angeles and confront Wolf, leaving Bret Callaway, a local bully, in charge of Kaylee's distracted grandmother after persuading him with a promise of summer school homework assistance.
Upon reaching Los Angeles, Jason and Kaylee cleverly deceive limo driver Frank Jackson (Donald Faison) into transporting them to the studio. There, Jason tricks receptionist Astrid Barker (Rebecca Corry) into stepping away from her desk, allowing him to confront Wolf. Initially, Wolf agrees to return the story but instead maliciously burns it, forcing Jason and Kaylee out of his office.
Determined to inconvenience Wolf for his treachery, Jason and Kaylee hatch a plan. Frank eventually learns of their real motives and decides to join their cause, sharing his own experiences of mistreatment by Wolf. They strategize for revenge, leading to hilarious antics like dyeing Wolf's pool and shampoo to give him blue skin and orange hair. Kaylee impersonates the secretary to the Universal Studios president to send Wolf to a child's birthday party, where he is mistaken for a clown and tortured by playful children.
In a series of chaotic events, Wolf's destructive experiences culminate in his car, a blue Jaguar XKR convertible, malfunctioning under their pranks, ultimately leading to a crash with a monster truck. Due to these misadventures, Wolf’s professional life begins to unravel; he even loses a crucial appointment with Marcus Duncan (Russell Hornsby), the president of Universal Studios, who is unimpressed with Wolf’s recent failures.
Faced with the possibility of career ruin, Jason offers to assist Wolf in salvaging the project in exchange for a heartfelt confession to his father. Guided by Jason, Wolf presents a convincing argument to Duncan but again betrays Jason by calling security to expel him and Kaylee. Just as all seems lost, Wolf's own secretary, Monty Kirkham (Amanda Detmer), allying with Jason and Kaylee due to widespread resentment of Wolf, helps them orchestrate a plan to take him down.
In an epic rooftop confession, Wolf inadvertently admits to stealing Jason's original story, blissfully unaware that he’s being recorded. The exposure leads to Wolf's downfall and tarnishes his reputation, prompting Duncan to fire him. Jason wears his newfound confidence as he thanks Wolf for imparting an invaluable lesson that "the truth is not overrated." As chaos ensues, Jason escapes and joyfully reunites with his supportive parents.
In the heartwarming epilogue, Big Fat Liar goes on to be a hit film, credited to the talents of those once oppressed by Wolf, with Jason receiving recognition for his original story. Meanwhile, Wolf faces his own consequences; now a bankrupt clown, he is confronted by the Masher’s son, resulting in a comedic and unforgettable moment of vengeance.
