Harry Caul, a surveillance expert in San Francisco, specializes in wiretapping services. He and his team are hired by a client, who identifies himself as "the Director", to eavesdrop on a couple walking through Union Square. Despite the background noise, Caul filters and merges the tapes to create a clear recording with ambiguous meaning. Caul is intensely private, obsessively guarding his own secrecy, haunted by guilt from a past job that resulted in three deaths.
Despite Caul's insistence that he is not responsible for how his clients use the surveillance, he is troubled by guilt and his Catholic faith. When he discovers a potentially dangerous phrase in the recording, "He'd kill us if he got the chance," Caul becomes increasingly paranoid. His attempt to deliver the recording is thwarted, and he believes he is being followed and tricked.
The tape is stolen by a prostitute Caul hired, Meredith, and he receives a call from Martin Stett, the Director's assistant, informing him that the Director couldn't wait any longer. Caul learns that the woman in the recording is the Director's wife, involved in an affair. Caul, suspecting murder, books a hotel room next to the one mentioned in the recording and overhears a heated argument. Convinced he witnessed a murder, Caul breaks into the room, but initially finds no evidence, until he casually flushes the toilet and finds it clogged and overflowing with blood.
Attempting to confront the Director, Caul discovers the wife is alive and unharmed, as is her lover. A newspaper headline reveals an executive's supposed death in a car accident, leading Caul to realize that the couple actually murdered the Director. He missed the emphasis on "us" in the recording, not only signifying the couple's fear of being killed by the Director if he discovered the affair, but also their own plan to murder him first.
Stett warns Caul not to investigate, playing a recording of Caul's saxophone to prove they are listening. Caul frantically searches for bugs in his apartment, destroying nearly everything except his saxophone. In the end, Caul is left alone amid the wreckage, playing his saxophone, the only intact part of his life.
