In a Berlin divided by the Berlin Wall, two angels, Damiel and Cassiel, watch the city, unseen and unheard by its human inhabitants. They observe and listen to the thoughts of Berliners, including a pregnant woman in an ambulance on the way to the hospital, a young prostitute standing by a busy road, and a broken man who feels betrayed by his wife. Their raison d'être is, as Cassiel says, to "assemble, testify, preserve" reality. Damiel and Cassiel have always existed as angels; they were in Berlin before it was a city, and before there were any humans.
Among the Berliners they encounter in their wanderings is an old man named Homer, who dreams of an "epic of peace". Cassiel follows the old man as he looks for the then-demolished Potsdamer Platz in an open field, and finds only the graffiti-covered Wall. Although Damiel and Cassiel are pure observers, visible only to children, and incapable of any interaction with the physical world, Damiel begins to fall in love with a profoundly lonely circus trapeze artist named Marion. She lives by herself in a caravan in West Berlin, until she receives the news that her group, the Circus Alekan, will be closing down. Depressed, she dances alone to the music of Crime & the City Solution, and drifts through the city.
Meanwhile, actor Peter Falk arrives in West Berlin to make a film about the city's Nazi past. Falk was once an angel, but, having grown tired of always observing and never experiencing, renounced his immortality to become a participant in the world. Also growing weary of infinity, Damiel's longing is for the genuineness and limits of human existence. He meets Marion in a dream, and is surprised when Falk senses his presence and tells him about the pleasures of human life.
The graffiti on the Berlin Wall is depicted in the film.Damiel is finally persuaded to shed his immortality. He experiences life for the first time: he bleeds, sees colours, tastes food and drinks coffee. Meanwhile, Cassiel taps into the mind of a young man just about to commit suicide by jumping off a building. Cassiel tries to save the young man but is unable to do so, and is left tormented by the experience. Sensing Cassiel's presence, Falk reaches out to him as he had to Damiel, but Cassiel is unwilling to follow their example. Eventually, Damiel meets the trapeze artist Marion at a bar during a concert by Nick Cave, and she greets him and speaks about finally finding a love that is serious and can make her feel complete. The next day, Damiel considers how his time with Marion taught him to feel amazed, and how he has gained knowledge no angel is capable of achieving.
