Set in Manhattan during the Wall Street boom of the late 1980s, American Psycho follows the life of wealthy young investment banker Patrick Bateman. Bateman, in his late 20s when the story begins, narrates his everyday activities, from his recreational life among the Wall Street elite of New York to his forays into murder by night. Through present tense stream-of-consciousness narrative, Bateman describes his daily life, ranging from a series of Friday nights spent at nightclubs with his colleagues — where they snort cocaine, critique fellow club-goers' clothing, trade fashion advice, and question one another on proper etiquette — to his loveless engagement to fellow yuppie Evelyn and his contentious relationship with his brother and senile mother. Bateman's stream of consciousness is occasionally broken up by chapters in which he directly addresses the reader in order to critique the work of 1980s pop music artists. The novel maintains a high level of ambiguity through mistaken identity and contradictions that introduce the possibility that Bateman is an unreliable narrator. Characters are consistently introduced as people other than themselves, and people argue over the identities of others they can see in restaurants or at parties. The question of whether any of the crimes depicted in the novel actually happened or whether they were simply the fantasies of a delusional psychotic is only perpetuated further by the cinematic adaptation.
After killing Paul Owen, one of his colleagues, Bateman appropriates his apartment as a place to host and kill more victims. Bateman's control over his violent urges deteriorates. His murders become increasingly sadistic and complex, progressing from simple stabbings to drawn-out sequences of torture, rape, mutilation, cannibalism, and necrophilia, and his grasp on sanity begins to slip. He introduces stories about serial killers into casual conversations and on several occasions openly confesses his murderous activities to his coworkers, who never take him seriously, do not hear what he says, or misunderstand him completely—for example, hearing the words "murders and executions" as "mergers and acquisitions." Bateman begins to experience bizarre hallucinations such as seeing a Cheerio interviewed on a talk show, being stalked by an anthropomorphic park bench, and finding a bone in his Dove Bar. These incidents culminate in a shooting spree during which he kills several random people in the street, resulting in a SWAT team being dispatched in a helicopter. This narrative episode sees the first-person perspective shift to third-person and the subsequent events are, although not for the first time in the novel, described in terms pertaining to cinematic portrayal. Bateman flees on foot and hides in his office, where he phones his attorney, Harold Carnes, and confesses all his crimes to the answering machine.
Later, Bateman revisits Paul Owen's apartment, where he had earlier killed and mutilated two prostitutes, carrying a surgical mask in anticipation of the decomposing bodies he expects to encounter. He enters the perfectly clean, refurbished apartment, however, filled with strong-smelling flowers meant, perhaps, to conceal a bad odor. The real estate agent, who sees his surgical mask, fools him into stating he was attending the apartment viewing because he saw an "ad in the Times" (when there was no such advertisement). She tells him to leave and never return.
At the end of the story, Bateman confronts Carnes about the message he left on his machine, only to find the attorney amused at what he considers a hilarious joke. Mistaking Bateman for another colleague, Carnes claims that the Patrick Bateman he knows is too much of a coward to have committed such acts. In the dialogue-laden climax, Carnes stands up to a defiant Bateman and tells him his claim of having murdered Owen is impossible, because he had dinner in London with him a few days before, not once but twice.
The book ends as it began, with Bateman and his colleagues at a new club on a Friday night, engaging in banal conversation. The sign seen at the end of the book simply reads "This is not an exit."