Master Sergeant Ernest G. Bilko (Steve Martin) oversees the motor pool at Fort Baxter, a modest U.S. Army base engaged in crafting cutting-edge military technology. Leveraging his position, he orchestrates a variety of clever scams, including a betting scheme where he tests a soldier's claims of strength against a horse in a tug-of-war match. This results in a surprising payday for Bilko after a strategically orchestrated first loss. Among his various ventures, he also plans to establish a daycare center on base to gain access to children's allowances.
Bilko receives help from Sgt. Henshaw (John Marshall Jones) and Sgt. Raquel Barbella (Pamela Adlon), while Spc. Dino Paparelli (Max Casella) runs the casino, Spc. Luis Clemente is the tech genius, and Spc. Tony Morales (Dan Ferro) manages the bar. The roster also includes Pfc. Mickey Zimmerman (Mitchell Whitfield), who is characterized by his blandness.
Enter Private First Class Wally Holbrook (Daryl Mitchell), a new recruit who is appalled by Bilko's brazen disregard for army regulations. Bilko even enlists Holbrook in a scheme to roll back the odometer of a General's car, which he has been renting out for profit. Adding to the chaos, Bilko's superior, Colonel John Hall (Dan Aykroyd), chooses to ignore his antics, focusing instead on the looming problems surrounding the development of the Hover Tank.
The military is under pressure, facing facility closures, and if the Hover Tank fails, Fort Baxter may be next on the chopping block. Maj. Ebersole (Austin Pendleton), overseeing the project, seems doubtful about its readiness for actual combat scenarios. Matters intensify with the arrival of Major Colin Thorn (Phil Hartman) from the U.S. Army Inspector General's office, who aims to scrutinize Bilko’s operations while avenging an old grudge related to a past boxing match fix that resulted in a humiliating incident for him at Fort Dix.
With determination, Thorn conducts surprise inspections, exposing the disarray in Bilko's barracks and his men's peculiar belongings, such as women’s undergarments mysteriously present in the men’s quarters. He also harasses a soldier who is overweight, setting harsh weight-loss expectations. Thorn's vendetta grows perilous as he sets his sights on Rita (Glenne Headly), Bilko's long-suffering fiancée, who is fed up with his perpetual procrastination in commitment. Despite Bilko's wariness, Thorn begins to court Rita, even proposing marriage.
In a bid to protect Bilko's financial empire, his friends from the Inspector General's office come in for a heady audit of the motor pool's books amid rising tensions with Thorn. Adopting a heartwarming angle, Bilko helps Holbrook secure a date, demonstrating his innate kindness beneath his scheming exterior.
While chaos brews, Bilko concocts a plan to counter Thorn’s scheme to transfer him to Greenland—he stages a spectacle involving the dysfunctional Hover Tank in front of top brass, betting his career on its success. During a climactic confrontation where Thorn accuses Bilko among dignitaries, he inadvertently reveals his own sabotage, securing Bilko's reputation and sending Thorn back to Greenland.
As the countdown begins for Rita’s ultimatum, she feels the weight of helplessness until she is unexpectedly serenaded by Bilko and his men. In a moment of heartfelt vulnerability, Bilko proposes, and after a brief card game, they exchange vows—though unbeknownst to Bilko, Rita holds four aces in her hand, hinting at both the playful and deceptive nature of their relationship.
