Steve Barker, Johnny Knoxville, suddenly receives a promotion at work and is forced to fire his friend Stavi, a hardworking immigrant janitor at the company. Steve reluctantly does so but hires Stavi to work around his apartment. While working, Stavi loses three fingers in a lawnmower accident and reveals that he does not have health insurance; Steve decides to raise $28,000 within two weeks to pay for the surgery to reattach Stavi's fingers.
His uncle Gary owes $40,000 in gambling debts and suggests that they fix the Special Olympics in San Marcos, Texas to solve both of their financial problems. Steve reluctantly enters the Special Olympics under the guise of a high-functioning young man named Jeffy Dahmor with a developmental disability. Assuming that Steve will easily defeat the legitimate contenders, Gary bets $100,000 that reigning champion Jimmy Washington won't win the gold medal. Despite initial disgust at pretending to be intellectually disabled, Steve goes along for Stavi.
During the competition, Steve falls in love with Lynn, a Special Olympics volunteer, Katherine Heigl. During this time, 6 other contestants see through Steve's act, so he tells them the truth about Stavi. As Steve decides to leave after exposure, they ask him to stay, resolving to help Steve save Stavi's fingers because they want to see the arrogant Jimmy lose.
In the meantime, Steve befriends the other contestants: he encourages Thomas to talk to a girl he likes and even takes the group to see a showing of Dirty Dancing. Steve gradually gets to know Lynn more but is dismayed to learn that she is seeing David; after Steve discovers that David is cheating behind Lynn's back, she blocks him and ends the relationship. At one point, Steve feels remorse for taking part in the Special Olympics and tells a priest in a confession booth, only for the priest to punch him in the face and kick him out of the church.
At the final competition, Steve's friend Glen comes in 1st, with Steve in 3rd behind Jimmy. During the medal ceremony, Steve admits that he is not developmentally disabled, reveals his actual name, and gives his medal to Thomas, who had finished 4th. Lynn, upset at Steve, rebuffs him when he attempts to apologize to her. Uncle Gary still wins his bet, as his condition was that Jimmy would lose.
Six months later, Steve quits his job and starts working in theater, producing a play with the friends he made during the Special Olympics and Stavi, who got his fingers reattached. Glen and the others trick Lynn into coming to the theater, and Steve starts to apologize. Lynn forgives him because Stavi told her why Steve pretended to be developmentally disabled, and they kiss.
In a mid-credits scene, Steve and his friends dance onstage with the Kids of Widney High as they perform the song "Respect".