Jack Lucas, a narcissistic, misanthropic shock jock, becomes suicidal and despondent when he learns that some of his insensitive on-air comments inadvertently prompted a mentally unstable regular caller, Edwin, to commit a mass murder–suicide at a Manhattan restaurant. Three years later, Jack is working for his girlfriend, Anne, in her video store, and is in a mostly drunken, depressed state, fearful of being recognized.
One night, while on a bender, he is moments from suicide. However, he is attacked and nearly set on fire by thugs who mistake him for a homeless person. He is rescued by Parry, a delusional homeless man who claims that his mission is to find the Holy Grail.
Parry tries to enlist Jack's help in getting the grail, explaining that the Fisher King was charged by God with finding the Holy Grail, but incurred an incapacitating wound for his sin of pride. "A Fool asks the King why he suffers, and when the King says he is thirsty, the Fool gives him a cup of water to drink. The King realizes the cup is the Grail and asks, 'How did you find what my brightest and bravest could not?' The Fool said 'I don't know. I only knew that you were thirsty.'"
Jack is initially reluctant, but acquiesces after learning that he is partially responsible for Parry's current condition. Parry, whose real name is Henry Sagan, had been a teacher at Hunter College. After witnessing his wife's gruesome death at the same mass shooting that Jack had provoked, Henry had a psychotic break and became catatonic. When he awakened, he took on the persona of Parry and became obsessed with the legend of the Fisher King. With Parry as his shielding persona, mentions of reality panic him, and he is continually haunted by a terrifying, hallucinatory Red Knight, from a distorted memory of his wife's head exploding from a shotgun blast.
Jack seeks to redeem himself by helping Parry find love again. Lydia, a shy woman with whom Parry is smitten, is prodded to meet Parry to join Jack and Anne for a dinner date. Afterward, Parry walks Lydia home and declares his love for her. She reciprocates, but the brush with reality summons the Red Knight. Fleeing his vision and the memory of his wife's murder, he is ambushed by the same thugs against whom he had defended Jack. Beaten mercilessly, Parry becomes catatonic again. Jack, feeling whole again after "saving" Parry, breaks up with Anne and begins to rebuild his career. However, he has a crisis of conscience during a sitcom pitch after snubbing a vagrant who had previously done a favor for him.
After finding out what happened to Parry, Jack dons Parry's clothing and infiltrates the Upper East Side castle of a famous architect and retrieves the "Grail", a trophy that Parry believes to be the real Grail. During the theft, Jack finds the architect unconscious from attempting suicide. He triggers the alarm while leaving, alerting authorities and saving the man's life.
When he brings the "Grail" to Parry, Parry regains consciousness and tells a silent Jack that he is ready to miss his wife. Lydia visits Parry in the hospital; she finds him awake and leading the patients of the ward in a rendition of the song, "How About You?", with Jack. Parry and Lydia embrace, and Jack reconciles with Anne, telling her that he loves her. She slaps him, but grabs and kisses him. That night, Jack and Parry lie naked in Central Park gazing at the clouds, as they view a fireworks display over New York.
