Napoleon Dynamite is a socially awkward high school student from Preston, Idaho who lives with his older brother Kip, their grandmother, and their pet llama, Tina. Kip, 32, is unemployed and boasts of spending hours in Internet chat rooms with "babes" and training to be a cage fighter; their grandmother leads a secret life involving mysterious boyfriends and quad-biking in the desert. Napoleon daydreams his way through school, doodling ligers and fantasy creatures, and reluctantly deals with the various bullies who torment him. Napoleon frequently makes up fantastic stories about himself and assumes a sullen and aloof attitude.
Napoleon's grandmother breaks her coccyx in a quad-bike accident and asks their Uncle Rico to look after the boys while she recovers. Rico, a middle-aged former athlete who lives in a campervan, uses the opportunity to team up with Kip in a get-rich-quick scheme to sell numerous items door-to-door. Kip wants money to visit his Internet girlfriend LaFawnduh, while Rico believes riches will help him get over his failed dreams of NFL stardom and the loss of his girlfriend.
Napoleon becomes friends with two students at his school: Deb, a shy girl who runs various small businesses to raise money for college; and Pedro, a transfer student from Ciudad Juárez. A friendship soon develops between the three outcasts. Inspired by a poster at the school dance, Pedro decides to run for class president, pitting him against Summer Wheatley, a popular and snobby girl at the school.
Rico and Kip's scheme causes friction with Napoleon when Rico begins spreading embarrassing rumors about Napoleon, to evoke sympathy from his prospective customers. Tensions finally come to a head after Rico tries to sell Deb a breast-enhancement product, claiming it was Napoleon's suggestion, which causes her to break off their friendship. Rico is ultimately beaten up by the town's martial arts instructor after the instructor finds Rico in his house, seemingly making advances on his wife. Kip, meanwhile, is head-over-heels in love, because LaFawnduh came to visit him from Detroit. She gives Kip an urban makeover, outfitting him in hip hop regalia, and they leave together on a bus for Michigan.
On the day of the class president elections, Pedro gives an unimpressive speech before the student body. After the principal unexpectedly informed them that Pedro needed to have a skit to accompany his speech, Napoleon gives the sound engineer a music tape he received from LaFawnduh, and performs an elaborate dance routine to "Canned Heat" by Jamiroquai. The routine receives a standing ovation from everyone except for Summer and her boyfriend.
The film concludes with Pedro becoming the class president, Rico reuniting with his estranged girlfriend, Grandma returning from the hospital, and Napoleon and Deb making up and playing tetherball.
In a post-credits scene, Kip and LaFawnduh are married in an outdoor ceremony in Preston. Napoleon, absent for the vows, arrives riding a horse, claiming that it is a "wild honeymoon stallion" that he has tamed himself. After Deb photographs Napoleon on the horse, Kip and LaFawnduh ride into the sunset.