Hook-handed Vietnam veteran Staff Sergeant John "Four Leaf" Tayback's memoir, Tropic Thunder, is in the process of being adapted into a film. The cast, consisting of fading action star Tugg Speedman, newcomer Kevin Sandusky, five-time Academy Award-winning actor Kirk Lazarus, rapper Alpa Chino, and drug-addicted comedian Jeff Portnoy, is a mix of talent and ego, creating chaos for inexperienced director Damien Cockburn. Tugg, once a beloved action hero, is now struggling with a tarnished reputation after his controversial role in Simple Jack and hopes that taking on the character of Four Leaf Tayback will rejuvenate his career.
As the production falls behind schedule and money is wasted on extravagant pyrotechnics, studio executive Les Grossman pressures Damien to restore order or face cancellation. Following Four Leaf's suggestion, Damien drops the actors into the jungle with hidden cameras, intending to film guerrilla-style. However, unbeknownst to them, they land in the treacherous territory of the Flaming Dragon gang, notorious for their heroin trade.
In a shocking turn of events, Damien steps on a landmine and is blown up, leaving the cast in a state of disbelief. Tugg convinces them that this is part of the performance, while Kirk, skeptical but compelled, decides to join the journey. As they venture through the jungle, the actors face off against the gang's militia but manage to outsmart them thanks to Kirk's quick thinking.
Tugg's misguided confidence leads him into a series of misadventures, drawing criticism from Kirk, who firmly believes one should never go full retard. As tensions rise, the group navigates internal conflicts about leadership and direction, ultimately realizing that they aren't even in Vietnam but rather deep in the Golden Triangle.
Captured by the Flaming Dragon, Tugg finds himself performing his infamous role from Simple Jack repeatedly, much to the gang's delight. Meanwhile, back in Los Angeles, Tugg's agent, Rick 'Pecker' Peck, faces off against Les over the actor's contract. A ransom demand for Tugg escalates the situation, with Les showing little concern for his well-being, focusing instead on the financial windfall.
Driven by desperation, Kirk, Alpa, Jeff, and Kevin hatch a plan to save Tugg, creating a distraction based on their film script. Miscommunication and hilarity ensue as their cover is blown, but in an unexpected twist, Tugg, initially hesitant to leave his newfound family among the gang, realizes the true value of his prior life and joins his friends in their daring escape.
In a final showdown, the four actors locate Four Leaf, Cody, and Tugg, leading them toward a helicopter while battling the gang. Just when it seems they might lose everything, Rick makes a heroic entrance with a TiVo box, inadvertently saving the day. Back in Hollywood, the footage captured by hidden cameras is transformed into the blockbuster Tropic Blunder, which becomes a massive success, earning Tugg his first Academy Award, presented to him by Kirk at the ceremony. In the end, Les revels in the film's triumph, celebrating eight Oscars and a staggering box office earnings of $400MM.