The film opens at the New York Public Library, where an older librarian is putting away books. All of a sudden, she is spooked by a not-so-friendly ghost. The library contacts a group of "parapsychologists" employed on a grant at Columbia University—Egon, Peter, and Ray. The men arrive at the scene of the ghost sighting and come face-to-face with a hostile apparition, but can do little to de-ghost the library. They take specimens back to their lab, where they run into a Columbia administrator, who informs them their grant is being rescinded and they are being fired.
Unemployed and hopeless, the men decide to buy a dilapidated defunct fire station and set up shop as a ghost exterminator business, calling themselves the "Ghostbusters." They hire a receptionist, Janine, and wait for the work to come in. Business is slow, but they do have a meeting with a beautiful young cellist named Dana Barrett, who had a strange experience in her apartment on Central Park West. One day, upon arriving home, a few eggs began to cook themselves on her counter, and when she opened her fridge, she came face-to-face with a primordial demon who called himself "Zuul." The Ghostbusters aren't sure how to help her, but they take her on as their first client. Peter, in particular, takes an interest in the case, becoming especially admiring of Dana's beauty.
Soon enough, just as it seems that the Ghostbusters are on the brink of financial ruin, their services are needed more and more around the city. A nice hotel needs them to get rid of a pesky green ghost which they successfully trap and store away on the premises. Not long after that, a number of places are calling in for ghost exterminations and the Ghostbusters are in business. They hire a new Ghostbuster, Winston Zeddemore.
Just when it seems that the Ghostbusters are on the top of their game, a representative from the Environmental Protection Agency, Walter Peck, comes to confront the Ghostbusters about what he sees as a violation of environmental law. Peter meets with him and is brusquely dismissive of Peck, asking him to leave and barely paying him any respect. Peter then goes and asks Dana if he can come over on Thursday to investigate the ghost problem at her apartment—an appointment that is half business/half date—to which she agrees.
On Thursday afternoon, Dana is possessed by the demigod, Zuul, and the inhabitation turns her into a frightening and seductive minx who declares herself "the Gatekeeper." Peter comes over on Thursday evening and is surprised to find her this way. Meanwhile, at Dana's neighbor Louis's apartment, another demon is hiding. In the middle of a party that Louis is throwing, the demon chases Louis out of the apartment and into Central Park, where it possesses him. Louis, a nerdy accountant, becomes "Vinz Clortho, the Keymaster."
The following day, Walter Peck returns to the Ghostbusters headquarters and insists that the Ghostbusters turn off all of their storage machines. While the Ghostbusters warn them that they ought not do that, as it will pose a huge threat to the city, Peck forces them to do so, releasing the many ghosts that they have caught back into the city. When the Ghostbusters look at blueprints of Dana and Louis's apartment building, they realize that it is secretly a gateway to the demonic world. A demon named Gozer—Zuul's boss—wants to destroy the world, and will use this gateway and his ghost minions to do so.
The Ghostbusters go to Dana's apartment building, where they are met by adoring fans. On the roof of the building, they find Dana and Louis, who have opened the portal to the demonic world. Gozer appears in the form of a beautiful woman, whom the Ghostbusters try to defeat. Eventually, Gozer announces that it will take any form that the Ghostbusters imagine, and while Peter urges them to empty their minds, Ray accidentally thinks of the Stay-Puft Marshmallow Man. Gozer takes the form of a giant demonic Marshmallow Man, and terrorizes the Upper West Side. Eventually, the Ghostbusters decide that even though it is dangerous, they will "cross streams" to destroy the portal. They each shoot their proton pack energy streams at the portal at the same time, pushing the streams together to form one. They successfully close the portal and send the demons back to where they came from. The Ghostbusters, Dana, and Louis descend from the apartment building to thunderous cheers and applause from the people of New York.