Two struggling and impoverished actors — the flamboyant and melodramatic Withnail and the quieter and more anxious Marwoodnote — share a squalid, dingy flat in London at the tail-end of 1969. Although Marwood has recently had an audition for a minor role in an upcoming theatrical tour, both men appear to have limited career prospects and spend most of their time drinking and using drugs, with Withnail particularly indulging in his vices. After an abortive attempt to do some of their cluttered and disgusting washing-up results in them fleeing the flat to a nearby park, Marwood suggests they take a vacation to the country. Although the two lack money, Marwood suggests that they make use of a country cottage owned by Withnail's wealthy uncle Monty.
After an altercation with a belligerent drunk in a local pub and a visit by Danny, a local drug-dealer, Withnail and Marwood visit Uncle Monty's luxurious townhouse to request the use of his country house. The flamboyant Monty, who is clearly attracted to Marwood, unsettles the younger man with his unsubtle flirtations, but after lying about the working class Marwood's background and a private conversation between Withnail and Monty, the latter agrees to let them use the cottage. Upon arrival, however, it soon becomes clear to Withnail and Marwood that their holiday will not be as relaxing as they initially thought — Monty's cottage is run-down and dilapidated, the locals are sullen and hostile, the weather is miserable, their supplies are low and neither Withnail nor Marwood are cut out for living rough. Withnail's arrogant manner quickly earns the enmity of a local poacher, Jake, who threatens Withnail and reveals that he knows where they are staying.
Withnail is soon driven to paranoid terror over Jake's threats and, fearing the poacher's violent retribution, insists on sleeping in the same bed as Marwood. The two men are panicked when they hear someone apparently breaking into the house, only to learn that it is Monty, who has unexpectedly arrived to join them. Although the two are initially relieved when Monty proves much more capable at country living, the true purpose of Monty's arrival soon becomes clear through Monty's insistent flirting with Marwood. Marwood, increasingly uncomfortable, demands that they return to London, but Withnail refuses, particularly once it is made clear that Jake has abandoned his threats to Withnail by leaving them a hare he has caught for them to eat.
After an evening poker game sees Withnail drunk and incapacitated, Monty sneaks into Marwood's room later that night and attempts to seduce him. Refusing to accept Marwood's insistence that he is heterosexual, Monty reveals that Withnail claimed that Marwood was a practicing homosexual who had been arrested for "toilet trading", and insists on gratification with Marwood "even if it must be burglary". Panicking, Marwood claims to be in a secret homosexual relationship with Withnail, which shames Monty into withdrawing his advances. Furious, Marwood confronts Withnail, who admits the deception with the excuse that it was the only way to acquire the cottage, claiming he didn't foresee Monty going to such lengths to seduce Marwood.
The next morning reveals that Monty has left suddenly during the night, leaving a melancholy note wishing Withnail and Marwood happiness together that he has never been able to find. Although Withnail is blithely unrepentant about the effects his lies have had, Marwood feels sympathy for Monty. The two receive a telegram at the cottage from Marwood's agent regarding his audition, summoning him back to London. The two begin to drive back to London, but the stressed and sleep-deprived Marwood is forced to pull over during the night to rest. When he awakes, he discovers that Withnail — who is intoxicated and has no driving license — has taken the wheel. The two are stopped by police and arrested.
When the two finally return to the flat, they discover Danny and another man squatting there in their absence. While Marwood meets his agent, Withnail gets high with Danny and the other man. Danny delivers a monologue bemoaning the end of The '60s and the transition of the lofty ideals of the age into the colder, more cynical 1970s. Marwood reveals that, instead of the minor part he initially auditioned for, he has been cast as the lead in the play. The elation is undercut by the realisation that this will mean parting ways from Withnail, and the fact that Danny has been stealing their mail, leading to the discovery of an eviction notice for unpaid rent.
Soon after, Marwood — now clean-shaven and with shorter hair — packs his belongings and prepares to leave the flat. Although Marwood rejects Withnail's offer of a parting drink (from an expensive bottle of wine stolen from Monty's collection), Withnail insists on walking Marwood to the train station through the heavy rain. While the two walk through the park, Marwood insists that Withnail return to the flat, but admits that he will miss the other man. Withnail watches Marwood go and, desolate, delivers a passionate recital of Hamlet's "what a piece of work is a man!" monologue to the only nearby audience, a pack of uncomprehending wolves in a nearby zoo enclosure. He turns and walks home in the rain, alone.
