1988: A young boy named Peter Jason Quill visits his mother in the hospital as she dies of cancer. She hands him a present and a letter, asking him to open it after she's gone. When she passes away shortly afterwards, Peter, overwhelmed with grief, runs outside the hospital, where he is abducted by an alien vessel...
Twenty-six years later, Peter Quill is a space-faring outlaw, going by the alias of "Star-Lord". He makes his way to a long-dead planet to retrieve an orb when he is accosted by mercenaries working for a Kree warlord known as "Ronan the Accuser". He makes his escape and is contacted by Yondu Udonta, the leader of the Ravagers and the one who abducted Peter as a child, who demands Peter give him the orb. Peter, however, intends to sell the orb to a broker. Enraged, Yondu issues a bounty for Peter: 40,000 units for his live capture.
Meanwhile, Ronan, who wishes for revenge against the Nova Empire after generations of war against his people and in defiance of the Kree and Nova peace treaty, sends one of his most capable assassins, Gamora, after Peter to retrieve the orb as part of a deal he made with Gamora's "father", the intergalactic warlord Thanos, to destroy the Nova homeworld of Xandar. While Peter and Gamora fight over the orb, Peter is pursued by a pair of bounty hunters: a genetically and cybernetically augmented raccoon named Rocket and a large tree-creature named Groot. All four are detained by the Nova Corps for the destruction wrought from their melee and sent to a penal space colony known as the Kyln.
Within the Kyln, Gamora is attacked by Drax the Destroyer, a dangerous inmate whose family was killed by Ronan. Peter manages to convince him to spare Gamora: she planned to take the orb for herself and sell it for four billion units, buying her freedom and betraying Ronan. As such, Ronan would come for her, giving Drax the chance he needs to exact his revenge. All of them agree to split the profit amongs themselves (except for Drax, who only wants revenge).
Rocket hatches a plan to allow himself, Groot, Peter, Gamora, and Drax to escape. While the plan goes awry, the five make their getaway and head towards Knowhere, a space station and criminal hotspot where Gamora would make the sale. They meet with a man known as the Collector, who owns a massive collection of various alien artifacts and lifeforms. The Collector reveals that the orb actually contains an "Infinity Stone", one of six gems possessed of incredible power. The Infinity Stone, in the hands of madmen like Ronan or Thanos, could cause destruction on a galactic scale.
One of the Collector's servants, tired of his mistreatment of her, attempts to take the Stone for herself, but upon grabbing it, is destroyed by its overwhelming power, the resultant explosion destroying the Collector's collection. Witnessing its power firsthand, Rocket suggests giving the Stone to Ronan and high-tailing it. Gamora suggests giving the Stone to the Nova Corps so they could safeguard it, a plan Peter and Rocket shoot down on account of all of them being wanted fugitives. Peter suggests relinquishing it to the Ravagers: even though they want him dead, it was a preferable alternative to incarceration.
Before they can agree on any plan, Ronan's forces descend on Knowhere, having been summoned by Drax making a call to him in the hopes of killing him. As Ronan fights against Drax and easily defeats him, Rocket, Peter, and Gamora attempt to escape with the Stone. The mining craft Gamora hijacked is shot down by her adopted sister, Nebula, and the orb is taken by her as Gamora is left to die in the vaccuum of space. Peter, determined to save her and against Rocket's advice, relays his coordinates to the Ravagers, then goes into space to give Gamora his mask, allowing her to survive while endangering his own life.
Both Peter and Gamora are taken into the Ravagers' flagship before either can die in space. Yondu confronts Peter and threatens to kill him, but Peter manages to convince him to spare him in exchange for a massive payday with the orb. They are joined by Rocket, Groot, and Drax afterwards, and Peter convinces them to help him fight back against Ronan, hopeless though such a battle may be.
As Ronan betrays Thanos and places the Infinity Stone in his warhammer so that he can destroy Xandar himself, Peter enlists the aid of both the Ravagers and the Nova Corps to fight back against Ronan. While Rocket holds off Ronans forces in a Ravager craft along with the Ravagers and Nova Corps, Peter, Gamora, Groot, and Drax infiltrate Ronan's flagship and fight their way to Ronan, shooting him with Rocket's homemade "Hadron Enforcer" and, when that doesn't work, having Rocket crash his ship into Ronan. While that seems to defeat Ronan, Peter and his friends find themselves trapped on Ronan's ship, facing certain death. Groot sacrifices himself by creating a cocoon around Peter, Rocket, Gamora, and Drax, saving them when the ship hits the planet's surface, while being reduced to splinters,\ himself.
Unfortunately, Ronan survived the impact and is moments away from reducing Xandar to a lifeless husk with the Infinity Stone. Peter, however, starts dancing, confounding Ronan and distracting him long enough for Rocket to rebuild his cannon and Drax to fire it at Ronan's hammer, liberating the Stone. Peter grabs it, and his body begins to disintegrate from the Stone's immense power. With the aid of Gamora, Drax, and Rocket holding one of Groot's splinters, however, Peter is able to control its power for long enough to destroy Ronan once and for all, and seal the Stone inside a new orb.
Afterwards, Yondu demands Peter relinquish the orb. Peter does so, but Yondu wouldn't know until much later that Peter handed him a fake orb containing a Troll doll while he kept the real orb and handed it over to the Nova Corps. It is also revealed that Peter's physiology is actually only half-Terran: the other half comes from an ancient alien being, which may explain how he was able to hold the Stone for as long as he had without being destroyed by it.
In recognition of their service to Xandar, the Nova Corps expunge the criminal records of Peter and his new friends and restore his spaceship. He retrieves the present and letter from his mother, who had given him the name of "Star-Lord" originally. The present is a mixtape, much like the one Peter had when he was abducted as a child, that contained music his mother loved when she was younger and that she would share with Peter.
With Ronan dead and the galaxy saved, Peter, Gamora, Drax, Rocket, and a bouncing baby Groot take off to seek out new adventures.