Dominick "Dom" Cobb and Arthur are "extractors": they perform corporate espionage using experimental military technology to infiltrate the subconscious of their targets and extract valuable information through a shared dream world. Their latest target, Japanese businessman Saito, reveals that he arranged their mission himself to test Cobb for a seemingly impossible job: implanting an idea in a person's subconscious, or "inception". To break up the energy conglomerate of ailing competitor Maurice Fischer, Saito wants Cobb to convince Fischer's son and heir, Robert, to dissolve his father's company. In return, Saito promises to use his influence once the job is done to clear Cobb's apparent criminal status, which prevents him from returning home to his children.
Though Arthur is convinced that the task is impossible, Cobb insists that it can be done. Cobb accepts the offer and assembles his team: Eames, a conman and identity forger; Yusuf, a chemist who concocts a powerful sedative for a stable "dream within a dream" strategy; and Ariadne, an architecture student tasked with designing the labyrinth of the dream landscapes recruited with the help of Cobb's father-in-law, Professor Stephen Miles. While dream-sharing with Cobb, Ariadne learns his subconscious houses an invasive projection of his late wife Mal.
After Maurice dies in Sydney, Robert Fischer accompanies the body on a ten-hour flight back to Los Angeles, which the team (including Saito, who wants to verify their success) uses as an opportunity to sedate and take Robert into a shared dream. At each dream level, the person generating the dream stays behind to set up a "kick" that will be used to awaken the other sleeping team members from the deeper dream level; to be successful, these kicks must occur simultaneously at each dream level, a fact complicated due to the nature of time which flows much faster in each successive level. The first level is Yusuf's dream of a rainy Los Angeles. The team abducts Robert, but they are attacked by armed projections from his subconscious, which has been specifically trained to defend against such intruders. The team takes Robert and a wounded Saito to a warehouse, where Cobb reveals that while dying in the dream would normally wake Saito up, the powerful sedatives needed to stabilize the multi-level dream will instead send a dying dreamer into "limbo": a world of infinite subconscious from which escape is extremely difficult, if not impossible, and in which a dreamer risks forgetting they are in a dream. Despite these setbacks, the team continues with the mission.
Eames impersonates Robert's godfather, Peter Browning, to suggest Robert reconsider his father's will. Yusuf drives them around in a van as the rest are sedated into the second level, a hotel dreamed by Arthur. Cobb persuades Robert that he has been kidnapped by Browning and Cobb is his subconscious protector. Cobb persuades him to go down another level to explore Browning's subconscious (in reality, it is a ruse to enter Robert's). The third level is a fortified hospital on a snowy mountain dreamed by Eames. The team has to infiltrate it and hold off the guards as Saito takes Robert into the equivalent of his subconscious. Yusuf, under pursuit by Robert's projections in the first level, deliberately drives off a bridge and initiates his kick too soon. This causes an avalanche in Eames' level and removes the gravity of Arthur's level, forcing him to improvise a new kick synchronized with the van hitting the water. Mal's projection emerges and kills Robert; Cobb kills Mal, and Saito succumbs to his wounds. Cobb and Ariadne enter Limbo to rescue Robert and Saito, while Eames sets up a kick by rigging the hospital with explosives.
Cobb reveals to Ariadne that he and Mal went to Limbo while experimenting with the dream-sharing technology. Sedated for a few hours of real time, they spent fifty years in a dream constructing a world from their shared memories. When Mal refused to return to reality, Cobb used a rudimentary form of inception by reactivating her totem (an object dreamers use to distinguish dreams from reality) and reminding her subconscious that their world was not real. However, after waking up, Mal still believed that she was dreaming. In an attempt to "wake up" for real, Mal committed suicide and framed Cobb for her death to force him to do the same. Facing a murder charge, Cobb fled the U.S., leaving his children in the care of his father-in-law.
Through his confession, Cobb makes peace with his guilt over Mal's death. Ariadne kills Mal's projection and wakes Robert up with a kick. Revived at the mountain fort, he enters a safe room to discover and accept the planted idea: a projection of his dying father telling him to be his own man. While Cobb remains in Limbo to search for Saito, the other team members ride the synchronized kicks back to reality. Cobb eventually finds an aged Saito in Limbo and reminds him of their agreement. The dreamers all awake on the plane and Saito makes a phone call.
Upon arrival at Los Angeles Airport, Cobb passes the U.S. immigration checkpoint and Professor Miles accompanies him to his home. Using Mal's old totem—a spinning top that spins indefinitely in a dream world but falls over in reality—Cobb conducts a test to prove that he is indeed in the real world, but he does not observe its result and instead joins his children in the garden.