The film opens on Mars, showing the last moments of a Mars rover's mission. As the rover prepares to sample Martian rock, it "kicks the bucket." The mission controllers congratulate themselves on a "successful" mission, while back on Mars the scene pans up from the dead rover to show a huge undiscovered Martian city. A spaceship is seen quickly rocketing from the city and accelerating into space.
News producer Tim O'Hara (Jeff Daniels), is fired for unwillingly "compromising" his boss's daughter, Brace Channing (Elizabeth Hurley), during a live broadcast of the first Space Shuttle launch from Vandenberg Air Force Base. His assistant, the shy Lizzie (Daryl Hannah), tries to comfort him, and it's apparent she has a secret crush on him. A while later, Tim witnesses a small Martian spacecraft crash landing. Realizing his chance to deliver a story that will "rock the Earth", he brings Brace to show her the ship. Nearby, its only occupant (Christopher Lloyd) and his talking space suit Zoot hides in the bushes. Tim takes the now-shrunken spaceship home with him with the Martian following him to retrieve it. He eventually has to knock Tim out, disguise himself to look like Tim and ends up kissing Lizzie when she visits.
When Tim confronts the Martian, he finds out the "electron accelerator," a small device which powers the control systems of the ship, is damaged beyond repair and the Martian needs Tim's help to find a replacement. Eventually, the Martian takes the name Uncle Martin and explores the city, unaware that they are being watched by SETI, which discovered DNA left by Martin while hiding out at Tim's. While exploring Tim's neighborhood, Martin tells him about a friend of his named "Neenert," one of his planet's most gifted Martian scientists, who came to Earth in 1964. Tim and Martin also stop by at a beach wear shop and Martin buys a new pair of clothes and leaves Zoot in the fitting room but then escapes out. Tim's other friends including Lizzie and Brace meet Martin without knowing that he really is a Martian yet, after this Brace is captured by the SETI gang as she is mistaken by them as an alien.
As the story continues, Tim secretly tapes Martin and Zoot with hidden cameras to back up his story and impress the TV station staff. Meanwhile, Martin and Zoot discover a subsystem called the Interstellar Safety System which is prepared to self-destruct, taking Martin's ship with it. Lizzie shows up at Tim's house, to discover Brace stealing the tape. After thinking that Tim cheated on her, Lizzie rejects him and storms out, only to be distracted by the now full size spaceship. A screenshot of Martin in the bathtub while in his Martian form, is discovered by Brace and she steals all of Tim's tapes.
Martin and Tim go after the Martian evidence, shrinking the ship (unfortunately, along with Zoot and Lizzie) and racing down to the station where Martin ties Brace to her office chair and gags her. Martin then disguises himself as her so he can take her place on the news where Martin's alien form is almost exposed. The broadcast is carefully watched by Elliot Coleye (Wallace Shawn), head of SETI. Tim admits to Martin that he has been videotaping him, but found he also likes Martin and apologizes. As footage from another news report is aired, Tim and Martin escape the station. Tim and martin escape through the sewers and into the hands of Coleye, who take them back to SETI for investigation.
At the lab, Tim tricks one of the scientists into growing Martin's ship to normal size, breaching security and allowing Lizzie and Zoot to escape. However, the trio's escape is blocked by two security guards,with the help of a "nerplex," a piece of alien gum that can transform anyone into another life form - in this case, a hideous monster from Veenox 7. Lizzie throws one of the guards to a panel. The other tries to escape, but Lizzie cuts him off and swallows him whole.
The three eventually succeed in locating Martin, who is about to undergo surgery, involving the removal of Martin's antenna. When Martin and Zoot reunite he comes back to life, and wakes up. The three then escape SETI headquarters and prepare to bid farewell to Martin, installing a car alternator in place of the damaged electron accelerator. He is intercepted by Coleye, but a SETI official named Armitan, actually Martin's old friend Neenert (Ray Walston), saves him by destroying Coleye's gun.
Eventually, Coleye consumes the piece of nerplex left by Neenert, and he's turned into an alien, too. While laughing at this, Coleye accidentally swallows the gum. He ends up getting caught by his own organization as Martin and Neenert head home.
In the end, Martin and Zoot return to Earth with enough supplies to settle down with Tim and Lizzie. Neenert flies Martin's spacecraft back to Mars. Tim initially objects to Martin staying, but a passionate kiss from Lizzie convinces Tim to change his mind. The film ends with Zoot in a washing machine, enjoying an issue of Victoria's Secret.
- Jeff Daniels as Tim O'Hara
- Christopher Lloyd as Martin/The Martian
- Elizabeth Hurley as Brace Channing
- Daryl Hannah as Lizzie
- Wallace Shawn as Dr. Elliot Coleye
- Wayne Knight (uncredited, but credited as Himself) as the voice of Zoot
- Christine Ebersole as Mrs. Brown
- Michael Lerner as Mr. Channing
- Ray Walston as Armitan/Neenert
- Shelley Malil as Felix
- Jeremy Hotz as Billy
- T.K. Carter as Lenny
- Dawn Maxey as Salesgirl
- Steven Anthony Lawrence as Nurplex Kid
- Michael Chieffo as Earl Metz
- Troy Evans as Captain Dalton
- Michael Bailey Smith as the big guard
- Sylvester 'Bear' Terkay as the huge guard