In the small town of Endora, Iowa, Gilbert Grape is busy caring for Arnie, his autistic younger brother who is about to turn 18, as they wait for the many tourists' trailers to pass through town during an annual Airstreamers' Club gathering at a nearby recreational area. His father had hanged himself seventeen years earlier; since then, his mother, Bonnie, has spent most of her days on the couch watching television and eating. With Bonnie's morbid obesity leaving her unable to care for her children on her own, Gilbert has taken responsibility for repairing the old house and being protective of Arnie, who has a habit of climbing the town's water tower, as well as trees, while his sisters, Amy and Ellen, do the other housework. A new FoodLand supermarket has opened, threatening the small Lamson's Grocery where Gilbert works.
A young woman named Becky and her grandmother are stuck in town when the International Harvester Travelall pulling their trailer breaks down. Gilbert's unusual life circumstances threaten to get in the way of their budding romance. To spend time with Becky to watch the sunset, Gilbert leaves Arnie alone in the bath. He returns home late and finds Arnie still in the bath the following morning, shivering in the now-cold water; his guilt is compounded by his family's anger and Arnie's subsequent aquaphobia. Becky becomes close to both Gilbert and Arnie. While they are distracted during one of their talks, Arnie returns to the water tower that he is always trying to climb. Arnie is arrested after being rescued from the top of the tower, causing Bonnie — who has not left the house in more than seven years — to become the laughing stock of the town as she goes to the police station, forcing Arnie's release.
Soon, Arnie ruins two birthday cakes: the first, which Amy has lovingly made, accidentally; and the second, a replacement from FoodLand, which he dips into, having found it in the refrigerator. Arnie tries to run away from his bath, and in his frustration, Gilbert finally snaps, hitting Arnie several times. Guilty and appalled at himself, Gilbert flees, driving away in his truck. Arnie also runs to Becky, who takes care of him for the evening, and helps him overcome his aquaphobia, until he is picked up by his sisters. After some soul-searching, aided by Becky, Gilbert returns home during Arnie's 18th birthday party to make amends to his family for running out, and to receive Arnie's reluctant forgiveness. He also apologizes to his mother for his behavior, and vows not to be ashamed of her or let her be hurt anymore. She acknowledges how much of a burden that she has become to the family, and he forgives her. Gilbert also introduces Bonnie to Becky, something he had been reluctant to do.
Following the party, Bonnie climbs the stairs to her bedroom for the first time since her husband's suicide. Arnie tries to wake her, but discovers that she has died. With no way to remove her body from the second floor, the police make plans to return with a crane the next day. The family instinctively knows that there will be a crowd of people there to get a laugh, instead of paying their respects. Wanting to keep her death from becoming a mockery, the family removes the furniture and belongings from the house, after which Gilbert lights a match to burn the house to the ground with her body still inside.
A year later, Amy gets a job managing a bakery in the Des Moines area, while Ellen looks forward to switching schools and living in a bigger city. Gilbert waits by the side of the road with Arnie, waiting for the tourist trailers to come again. As part of the convoy, Becky arrives with her grandmother and picks them both up. Gilbert tells Arnie, "We can go anywhere."
