The film chronicles the rise of a rock band from Erie, Pennsylvania, emerging just before the British Invasion that followed the success of The Beatles. Guy Patterson, portrayed by Tom Everett Scott, is a talented drummer with dreams of jazz music, currently stuck in a superficial relationship with Tina Powers. When the group’s usual drummer, Chad, suffers an injury, rhythm guitarist Jimmy Mattingly and lead guitarist Lenny Haise, played by Tom Hanks and Charlize Theron, respectively, invite Guy to step in for a talent show at Gannon College, hoping to snag the $100 prize.
During rehearsal in a garage, they craft a ballad titled “That Thing You Do,” suggested by Jimmy’s girlfriend, Faye Dolan; she proposes the quirky name "The Oneders," though it is frequently mispronounced as the "oh-NEE-ders." At the talent show, Guy kicks up the tempo, making it a danceable hit, earning the band not only the prize but also their first gig at a local pizza place.
After a fan requests a record, Guy’s Uncle Bob helps them cut a vinyl of their song, which Faye sells at their performances. Their big break arrives when talent scout Phil Horace spots them, buys a record, and convinces Guy at the appliance store that he can help them achieve radio play and bookings in larger cities. Despite Jimmy's fears about giving up his music rights, the band signs with Horace, setting their sights on a bigger stage.
Success follows as their single climbs the Billboard charts and they begin touring across the Midwest with other Play-Tone artists. However, personal strife ensues—Tina, unimpressed by Guy’s new fame, leaves him for her dentist, while Jimmy finds himself entangled in an affair with actress Diane Dane.
Amidst the chaos, the band is called to Hollywood to perform on The Hollywood Television Showcase, where they also learn about an upcoming film project. However, the pressures begin to unravel the band, leading to significant betrayals and breakups, especially when Jimmy walks away from the recording session, frustrated with the constraints placed on his music. Lenny’s absence during this critical time is felt, as he gets sidetracked with a Play-Tone secretary and ends up marrying her in Las Vegas.
In the studio, Guy’s talent shines as his unplanned drumming captures the interest of jazz great Del Paxton, leading to an impromptu jam session between the two. After the tour and various heartbreaks, Guy and Faye confess their love, facing an uncertain but hopeful future together. The epilogue paints a vivid picture of their lives in Los Angeles, as they marry, start a family, and Guy shares his passion for jazz composition by founding a music conservatory. Meanwhile, Jimmy moves on to create a new band with commercial success, Lenny finds a new path in casino management, and the original bassist earns military honors, beginning a new chapter in construction.
