The film opens, literally, inside the mind of the protagonist, Jack/the Narrator. The character's real name is never established, but "Jack" comes from the credits. The camera moves along neural pathways inside Jack's brain and emerges out of his head where we see that Jack is seated with a gun in his mouth. The gun is held by Tyler Durden. Jack and Tyler are on an upper floor of what appears to be an office building. Jack explains in voice-over that he and Tyler are awaiting a massive detonation of various buildings around them and that his current situation has something to do with a woman named Marla Singer.
The scene shifts to a support group for men recovering from testicular cancer. We learn that Jack has been attending support group meetings for survivors of a variety of diseases though he is completely disease-free. These meetings allow him to cry and accept the pain and misery of his everyday life. Because he can cry, he can also sleep. Jack suffers from insomnia. This drove him to seek medical treatment. The doctor he saw was not so sympathetic and instead of giving him sleep aids, advised Jack to visit the support group for men with testicular cancer. "That's pain," the doctor says.
After attending all these meetings for some time and feeling more content with his existence, Jack's reality is shaken when Marla Singer, a woman, suddenly begins attending the testicular cancer group. Jack sees her at all of his other meetings too. She is completely disease-free as well. With her present in the room, Jack cannot cry and so he cannot sleep. He fantasizes about telling her off and finally confronts her at one of the meetings. She is not intimidated by him at all. She finally agrees to split up the week of meetings with Jack so they do not have to run into each other anymore. Jack obtains Marla's phone number in case they ever have to reschedule.
Jack works as a recall coordinator for the automobile industry. His job is to fly around the country and write up accident reports on his company's cars to see if there are any potential liabilities. While seated on a plane flying home Jack finds himself seated next to a soap salesman named Tyler Durden. Tyler is highly unusual, dressed in colorful outrageous clothes, and spouting various odd conspiracy theories. Jack finds himself envying Tyler's view of life and the relative freedom it grants him. He watches Tyler stand up and sneak his way into the first class section of the airplane.
When Jack arrives at his apartment building he finds that his unit has been blown up. His belongings line the lawn in front of the building. He finds Marla's number amongst the ashes and calls her but hangs up without saying anything. He pulls Tyler's business card from his pocket and gets in touch with him. They meet at a bar where, over the course of three pitchers of beer, Tyler rejects the consumerism and product worship that have come to permeate Jack's life.
The two men leave the bar and step into the parking lot. Jack says he should find a hotel. Tyler tells him he can stay with him, but that he needs a favor. "I want you to hit me as hard as you can", says Tyler. Jack launches into a voice-over recounting Tyler's life. We see that Tyler works night jobs as a projectionist (where he splices single frames of pornography into family films) and a banquet waiter (where he serially befouls the food with his bodily fluids). Returning to the parking lot scene, Jack finally and reluctantly winds up and punches Tyler. Tyler returns with a punch to Jack's gut. The two men then engage in a sloppy but spirited fight.
Following the fight, the two men share a bottle of beer and retire to Tyler's house: a dilapidated, possibly condemned old house in an isolated industrial section of town. Nothing in the house really works. The pipes spew dirty water and when it rains the basement floods. Nonetheless, Jack begins living in the house with Tyler. The two continue to engage in fights. Jack begins coming to work sporting impressive bruises and cuts. His boss is not pleased.
As the film progresses we see that fighting and the rejection of his old values are becoming a larger part of Jack's life. Jack's boss is increasingly uncomfortable around Jack, whose disheveled appearance is less and less appropriate for the work environment. At home, Tyler and Jack have a discussion about their fathers, each of which had little presence in their lives. Tyler says that he and Jack are members of a generation raised by women and that another woman, a wife, may not really be the answer they need.
The bar at which Tyler and Jack had their first fight is now the meeting point for a group of men that Tyler and Jack have attracted with their fighting, proving that they are not alone in how they feel. In a secret agreement with the bartender, the men use the basement of the bar for their fights. Tyler dubs the group "Fight Club" and explains the rules of the club to its members. The most important rule is that fight club is to remain a secret. No one is to discuss it outside at any point.
One day the phone at Tyler's house rings. Jack answers it to find that it is Marla calling. She's tracked him down, asking why he hasn't been going to meetings. Jack reminds her that they split them up. Marla confesses she's been going to his anyway only to find that he wasn't there. She tells Jack that she has ingested most of a bottle of Xanax. Jack is not in the mood to listen to this. As Marla babbles on, Jack puts the receiver down and walks away. That night he has a sex dream featuring Marla.
The next morning Jack is eating breakfast in the kitchen when he hears footsteps on the stairs, presumably Tyler's. Instead, Jack is shocked to find that it is Marla. Jack is incensed and asks what she's doing in his house. She curses at him and leaves abruptly. Tyler then descends the stairs. He explains that after Jack left the phone off the hook he picked it up and heard Marla. In a flashback sequence we see Tyler going to Marla's apartment and retrieving her before bringing her back to the house. She tells Tyler that if she falls asleep she will probably not wake up due to the Xanax she took. He has to keep her up all night. He and Marla have sex all night to achieve that. Jack is both emasculated and disgusted. Tyler asks if Jack has any feelings for Marla. He vehemently denies having any. Tyler makes him promise that he will never speak to Marla about him or what they do in that house. Jack agrees but is still upset. He is feeling like a third wheel.
Jack now comes home every day from work to hear Tyler and Marla having loud sex. He tries to block it out but it clearly irritates him. The phone in the house rings again. Jack answers it to find that it is Detective Stern of the police's arson unit. He is calling regarding Jack's apartment. He tells Jack that someone broke into his apartment and planted home-made dynamite to blow the unit up. Jack is surprised to hear this. Tyler appears and tells Jack that Detective Stern just wants to hear him say that Jack blew up his own apartment. Jack asks Stern if he is a suspect. Stern tells him to let him know if Jack is planning on leaving town. Jack hangs up to find that Tyler has disappeared but that Marla has come downstairs. She is wearing a bridesmaid's dress that she bought at a thrift store for $1. She comes on to him, grabbing his crotch. He insults her and she leaves abruptly again. Jack watches her go, this time with a tinge of sympathy on his face. Tyler suddenly reappears. Jack asks why he wastes time with Marla. Tyler says that at least she's trying to hit rock bottom. Jack asks what they are doing tonight. Tyler says they will make soap.
The next sequence finds Jack and Tyler descending on a liposuction clinic, where Tyler steals giant plastic bags of fat to take back with them. At home Tyler begins rendering the fat while Jack watches and learns. Tyler explains the ancient origins of soap and how it was an unintended result of human sacrifices which created lye and crept into river streams. Tyler takes a container of lye and then takes Jack's hand. He licks his lips and kisses Jack's hand before pouring lye on it. Jack's skin begins to sizzle and burn. He screams out in pain. Tyler tells Jack to stay with and accept the pain and the fact that one day his life will end. Jack fights and squirms but eventually calms down until Tyler pours vinegar on the wound to neutralize it. Jack collapses. Tyler tells him he's one step closer to hitting rock bottom.
At work Jack is descended upon by his boss, who has found a copy of the rules of fight club in the photocopier. He asks Jack if it belongs to him. Jack does not take responsibility but makes a thinly-veiled threat stating that the person who wrote these rules is "dangerous." Marla calls to tell Jack that she has found a lump in her breast and needs someone to check it for her because she can't afford a doctor. Jack goes to her apartment and reluctantly performs a breast exam, finding nothing. Marla pecks him on the cheek but Jack leaves quickly. Outside, he runs into Bob, a man he met at the testicular cancer support group. Bob tells Jack that he is now a member of fight club, which is news to Jack.
Later on at a meeting of fight club, Tyler remarks that he has seen a lot of new members, indicating that people are breaking the first rule of fight club. Tyler delivers a short monologue outlining his philosophy regarding advertising and how it has sold this generation a false narrative. Tyler gives the men a homework assignment: start a fight with a stranger and lose that fight.
The members of fight club go about completing their homework assignment and thereby recruiting new members to the organization. Jack goes to see his boss to have a frank discussion about the tension between them. Jack asks his boss to continue paying him instead of firing him. In exchange he will simply not tell anyone about the safety issues regarding the cars their company builds. His boss is furious at being blackmailed and calls security from his desk phone. Jack proceeds to beat himself up in front of his boss. When security arrives all they see is a beaten man kneeling before Jack's boss. Jack's demands are immediately met. He and Tyler can now have fight club every night of the week.
One morning Marla comes down the stairs into the kitchen where Jack is seated. She tells him that she will leave in a minute. Jack tells her it's okay if she stays and they talk a bit about Tyler. Suddenly Jack hears noise in the basement of the house. He finds Tyler at the bottom of the stairs. Tyler asks if they are talking about him. Jack says no and ends the conversation with Marla. She leaves frustrated, but concerned. In the basement Jack finds that Tyler has been constructing bunk beds.
Outside Jack finds that "applicants" are arriving for admission. On the porch they wait for admission into the house. Jack is unsure of what they are applying for but Tyler tells him to reject them all at first. After a day or two sitting outside, they are allowed to enter. The number of applicants increases over time. Tyler comes to call them "Space Monkeys" after the first animals sent into space as a sacrifice for progress. The house becomes a hive of activity, though Jack is unsure what the plan actually is. A news broadcast links recent acts of vandalism committed by these men to "underground boxing clubs." The chief of police vows to hunt down the group and shut them down. Following this announcement the men infiltrate a policeman's banquet and act as the event's waiters. They corner the chief of police in the men's bathroom and threaten to castrate him unless he calls off his investigation. The chief of police agrees.
While driving home from a night at Lou's Tavern Tyler and Jack argue. Tyler has moved fight club out of the basement and started something new called Project Mayhem, all without telling Jack about any of it. Jack is insulted that he was never included in this, stating that he thought the two of them were doing this together. Tyler says that this is no longer about just them and that Jack doesn't really understand their relationship. Tyler confesses that he is the one who blew up Jack's apartment. Jack is shocked but there's no time to process this. Tyler steers the car into oncoming traffic. Jack fights for the wheel as cars swerve to dodge them. He finally snaps, telling Tyler he is sick of this. Tyler tells him he needs to let go and stop trying to control everything. He lets go of the steering wheel and the car flips over an embankment.
Jack comes to in his bedroom at the house. He is in and out of consciousness as Tyler describes a world that has returned to a hunter-gatherer/pre-agrarian lifestyle. When Jack fully awakens Tyler is nowhere to be found. The Space Monkeys are still in the house, hard at work, though Jack is still unsure of what they are doing. Marla comes by but Jack tells her that Tyler is gone. She walks away, pained. A commotion inside the kitchen draws Jack back. Bob has been shot while on an assignment for Project Mayhem. He's dead. The Space Monkeys are prepared to bury Bob in the garden outside. Jack says no, that this is a man and he deserves respect. He tells them his name was Robert Paulson. The men tell Jack that members of Project Mayhem have no names.
Jack runs up to Tyler's room and finds used flight coupons. Tyler has been traveling extensively all over the country. The phone rings. Detective Stern wants Jack to come down to the station. Jack hangs up and begins retracing Tyler's steps around the country. He learns that Tyler has been starting fight clubs all over the country and amassing a makeshift army for Project Mayhem. Everywhere Jack goes people seem to know him, as if they've met before. One such man tells Jack they met a week ago. When Jack asks him who he thinks Jack is, the man answers, "You're Mr. Durden."
Jack calls Marla from his hotel to ask if they have ever had sex. Marla is confused but uses the opportunity to chastise him for the nature of their relationship. She calls him Tyler. Jack is in a cold sweat at this point. At that moment Tyler suddenly reappears. He confirms that he and Jack are the same person, and that he is a mental projection of Jack's. Jack faints.
Jack wakes up in his hotel room and then races back to the house. It is empty. He collects whatever evidence he can and decides to go to the police. On the way he stops at Marla's apartment and tries to apologize to her for the way he has treated her. He tells her that she is in danger and should get out of town for a few weeks. Marla thinks he is insane but he convinces her to board a bus and leave town. Jack then goes to the police station and tells Detective Stern that he believes the plan hatched by Project Mayhem is to blow up the headquarters of several major credit card companies, thereby erasing the debt record. Detective Stern hears him out and leaves Jack in an interrogation room with several other officers. After Stern leaves, the other officers reveal themselves to be members of Project Mayhem. They tell him they are impressed with his commitment. Tyler had said that if anyone ever tried to stop Project Mayhem, even Jack/Tyler himself, that man should be castrated. The officers pin Jack down. He grabs one of their firearms and runs away.
Jack makes his way to one of the credit card company buildings. In the garage he finds a van filled with explosives. Tyler appears again. Jack disarms the bomb in the van, triggering a fight between him and Tyler. Tyler defeats Jack by throwing him down a flight of stairs. When he wakes up we find ourselves at the scene the film began with. Tyler is holding a gun inside Jack's mouth. They are waiting for the bombs to detonate that will destroy the credit card company buildings. Jack begs Tyler to stop this plan. Tyler tells him that Jack needs him, that eventually there will no longer be a Jack, only Tyler. Outside a bus comes to a stop. Marla is escorted off of the bus by Space Monkeys. Tyler says that she knows too much and has to be dealt with. Jack realizes that if he and Tyler are the same person, Tyler can't be holding the gun, only he could have control of it. He puts the gun to his own head. Tyler remains cool but is clearly concerned. Jack puts the gun inside his mouth and blows a hole through his own cheek. Tyler drops to the ground, a gunshot wound in the back of his head. Marla and the Space Monkeys enter where they are shocked to see the wound in Jack's face. The Space Monkeys are dispatched by Jack to find gauze, marveling at how tough Jack is, whom they have only known as Tyler Durden. Jack and Marla stand hand in hand as the bombs go off outside. Buildings in the background crumble to the ground. "You met me at a very interesting time in my life," says Jack.