Royal and Etheline Tenenbaum, portrayed by Gene Hackman and Anjelica Houston, are a wealthy couple residing in New York City with their three prodigiously talented children. Their eldest son Chas is a financial and chemical genius, while their adopted daughter Margot, played by Gwyneth Paltrow, has made a name for herself as a playwright. The youngest, Richie, is an exceptional tennis player. Although Royal loves his family deeply, his insensitive and brash nature often drives a wedge between them. After their children are born, Royal and Etheline separate, while he chooses to stay in a luxurious hotel for the next twenty-two years, distancing himself from his family.
As adulthood descends on the Tenenbaum siblings, they have become weary, melancholic shadows of their former selves. Chas (Ben Stiller) is grappling with the recent loss of his wife in a plane crash, now solely raising their two sons, Ari and Uzi. Margot is locked in a stifling marriage to the significantly older neurologist, Raleigh St. Clair (Bill Murray), battling writer's block and unhappiness. Meanwhile, Richie (Luke Wilson) is trying to escape his turbulent past after abruptly retiring from tennis following a breakdown during an important match. Their mother, Etheline, now an accomplished archaeologist, remains a model of stability, contrasting sharply with Royal.
A turning point arises when Etheline’s infatuated accountant, Henry Sherman (Danny Glover), proposes to her. Although she has genuine feelings for Henry, Etheline requires time to make sense of her complicated relationship with Royal. Royal learns of this news from their long-time servant, Pagoda (Kumar Pallana), and resolves to reclaim his family. Chas, driven by paranoia over his children's safety, moves back in with Etheline. Margot, in search of change from her mundane marriage (often spending her days locked in the bathroom chain-smoking), also returns home, hiding an affair with Richie’s close friend, author Eli Cash (Owen Wilson), who is painfully aware of Richie’s feelings for Margot.
Facing eviction, Royal concocts an elaborate scheme to regain his family by feigning a terminal illness. He misleadingly tells Etheline that he has stomach cancer and wants to reconcile with her and the children before he dies. While Etheline reluctantly agrees to at least hear him out, she also accepts Henry's proposal. As Chas remains skeptical of Royal’s intentions, Margot takes a more indifferent stance, contrasting with Richie, who shows concern for the father he wishes to connect with once more. Royal’s deception unravels when Henry exposes his farce, which prompts an outraged Etheline to cast him out.
Struggling with his own complexities, Richie is torn by his unrequited love for Margot and is highly disturbed by his brother-in-law Raleigh's suspicions regarding her loyalty. This culminates in the hiring of a private investigator who unveils shocking revelations about Margot’s past, overwhelming Richie and leading him to a suicide attempt. Although he survives, the family is shaken to the core by the events. After navigating through their shared trauma, Richie and Margot eventually confess their feelings for one another, igniting a glimmer of hope amid the chaos.
In a transformative moment, Royal grants Etheline the divorce he had withheld, laying the groundwork for her future with Henry. On what is meant to be a joyous wedding day for Etheline, chaos ensues when Eli, in a drug-induced haze, crashes his vehicle into the house, injuring Chas and nearly harming his children, Ari and Uzi. In the aftermath, the family comes together, highlighting their shared struggles and the need for collective healing. Royal compensates Chas for the loss of their pet by giving him a Dalmatian, signifying his desire to reconnect and support his family.
As time moves on, Etheline and Henry finally marry in a simple ceremony. Royal enjoys a bittersweet yet content life with his family, especially cherishing his bond with Chas and his grandsons. Ultimately, however, at the age of 68, Royal suffers a fatal heart attack. The family gathers at his funeral, contemplating the recent trials they faced together as they lay him to rest beneath a grave marked by the inscription: "saved his family from the wreckage of a sinking battleship."
