Barbara and Adam Maitland are taking a stay-cation in their beautiful, rambling home in a sleepy New England town. They are coming under some heavy pressure from Jane, the real estate agent who sold them the home; she points out that it is far too big for just two people and offers some enticing arguments in favor of them putting it back on the market. The Maitlands remain unconvinced, and head into town to avoid her. On the way home they swerve to avoid hitting a dog. The sudden swerve propels the car into the river and they die.
But neither Maitland seems to realize that they are now dead. They return to the house, but Adam is confused how they got there, deciding to go back outside and retrace their steps exactly. This does not prove to be the retracing of steps that he was expecting; instead of the familiar landmarks he finds himself in a peculiar landscape, deserted but for giant striped sandworms. When he returns, Barbara tells him that not only has he been gone for two hours—though it feels to him like ten minutes—but she has also found The Handbook For The Recently Deceased on the coffee table. They realize that they are dead, exiled to their house.
The Maitland's house swiftly goes back on the market (thanks to Jane) and is snapped up by New Yorkers Delia and Charles Deetz, who move in with their daughter Lydia. While Charles loves the sleepy town and the change of pace, Delia hates it. Trying to liven the house up, she commissions her decorator, Otho, to redecorate according to her tastes. This does not sit well with the Maitlands, who hate to see their house taken over by status-conscious city folk. They try to scare the Deetzes into moving but are unsuccessful. They hide in the attic and Adam locks the door, but Lydia discovers a skeleton key and goes in to find them after seeing them in the window. As Adam and Barbara hold the door closed, a television in the attic springs to life and a commercial comes on for the services of a “bio-exorcist” who specializes in scaring the living, named "Betelgeuse." Adam consults their handbook and creates a door that takes him and Barbara to a waiting room in the Afterlife. Then they are taken to a second room, which looks like the renovated living room of the Deetz’s home. They are introduced to Juno, their case worker, who scolds them for their inability to haunt the house. She warns them not to enlist the services of the man whose advertisement they saw.
The Maitlands try again with traditional scare tactics, dressing up in sheets to try to frighten the Deetzes. They fail to scare them, succeeding only in getting on Lydia's last nerve with their “spooky” noises. She finds them and is able to see them, but is barely frightened. Lydia admits that she found their handbook and it explained that "living people ignore the strange and unusual." Since "strange and unusual" is exactly how she describes herself, she agrees to help them. But still, her parents refuse to believe in the ghostly couple. Barbara is stumped. She finds a small model of a town that features a tiny gravestone with the name "Betelgeuse" on it. At first mispronouncing his name, when she says "Beetlejuice" three times, she and Adam are sucked into the model where they exhume Beetlejuice's body. They immediately regret it; his personality is abrasive and he is apparently completely uncouth and even insane. They decide to continue to scare the Deetzes themselves. Delia throws a dinner party to show off her new decor and the entire group starts to unconsciously lip-sync and dance to Harry Belafonte’s "The Banana Boat Song" while the shrimp dish before them turns into a dish of grasping hands. The Maitlands believe they have finally succeeded in scaring the Deetzes, but they have actually only amused and entertained the party guests, and Lydia is sent to the attic to bring them down to the party. They refuse to come down so everyone goes up to the attic instead. The Maitlands are nowhere to be seen, but Charles finds the intriguing miniature town and the handbook. He feels that there is a business opportunity in the ghosts' presence but his cheerful optimism turns to fear and horror as Beetlejuice changes into a huge snake, knocking Otho down the stairs and dropping Charles down to the floor below. Lydia is hysterical because she thinks the Maitlands have created the snake to scare them. The Maitlands are hauled before Juno again and this time chastised for repeated rule breaking. They have appeared in Lydia’s photos (breaking the laws of the dead) they have let Beetlejuice out, and they have allowed humans to see the handbook. They need to work harder to scare the Deetzes, Juno tells them. The Maitlands try to appear more grotesque and frightening, but Barbara likes Lydia and feels guilty.
Lydia is so distraught that she writes a suicide note. She goes to the attic to say goodbye to Barbara and Adam but instead runs into Beetlejuice. He tries to convince her that if she says his name three times it will help her to find the Maitlands; his trick almost works, but Lydia realizes in the nick of time that Beetlejuice was the snake and that he likely won't help her. The Maitlands appear and Lydia tells them she wants to be dead like them. They try to talk her out of it and tell her they are not going to scare the family anymore, but instead try and share the house peacefully.
Otho and Charles arrive in the attic, so Lydia and the Maitlands hide. The men carry the model of the town downstairs, which they show to Charles’ business associate, Maxie Deen. They plan to turn the town into a theme park centered around the paranormal. Charles demands Lydia produce the Maitlands but she refuses. Otho claims to be able to produce them without her help and uses the handbook and the Maitlands' wedding clothes to perform a seance and force them to appear. When they appear on the dining room table, Adam and Barbara begin to deteriorate and all that appears are their decaying corpses. Lydia sees Beetlejuice in the model graveyard and begs for his help. He agrees on the condition that she marry him, to which she hastily agrees in order to save the Maitlands. When Adam and Barbara are saved by Beetlejuice’s intervention, Beetlejuice forces Lydia to keep her promise and begins a wedding ceremony. Adam and Barbara struggle to stop him, managing to defeat him by sheer effort and will. Afterwards, the Deetzes and the Maitlands occupy the house together in harmony, having successfully exterminated Beetlejuice. Lydia becomes much happier and is no longer anxious to kill herself.