After losing their jobs at Columbia University, a trio of misfit parapsychologists — Peter Venkman, Ray Stantz, and Egon Spengler — establish their own paranormal exterminator service, "Ghostbusters." The business, operating out of an abandoned fire station, gets off to a slow start, but just as they run out of money, the Ghostbusters are contacted by the upscale Sedgewick Hotel to investigate a haunting. At the hotel, they successfully (albeit chaotically) capture their first ghost and deposit him into a "containment unit" of their own design located at the Ghostbusters office. Paranormal activity appears to be on the rise in the city and business skyrockets for the Ghostbusters, who become local celebrities and hire a fourth member, Winston Zeddemore.

The Ghostbusters are hired by a woman named Dana Barrett, whose apartment at 55 Central Park West is haunted by a demonic spirit called Zuul, a demigod worshiped in 6000 BC as a servant to Gozer the Gozerian, a Sumerian shape-shifting god. Venkman, who finds Dana attractive, takes a particular interest in the case, competing for her affection with her socially-inept neighbor Louis Tully. As they look into the matter, Dana is possessed by Zuul, which declares itself "The Gatekeeper". Louis is also discovered to be possessed by a similar demon called Vinz Clortho, "The Keymaster". Both demons speak of the coming of the destructive god Gozer, and the Ghostbusters decide it would be prudent to keep the two separated from each other. However, the next day, the Ghostbusters office is visited by Walter Peck of the EPA, who arrests the team and orders their ghost containment grid is shut down, unleashing hundreds of ghosts onto New York City. Freed from the Ghostbusters' protective custody, Louis/Vinz begins making his way toward Dana/Zuul's apartment as the escaped ghosts create havoc throughout the city.

Consulting blueprints of 55 Central Park West, the Ghostbusters learn that it was built by a mad doctor and cult leader named Ivo Shandor who designed the building to act as a spiritual magnet to summon Gozer and bring about the end of the world. The Ghostbusters are brought to the mayor's office and freed in order to combat the paranormal activity. The Ghostbusters head towards the Shandor Building, arriving at the shrine at the top. They are unable to stop Dana and Louis from transforming into demonic beasts and summoning Gozer, who initially appears as a woman. Briefly subdued by the team, Gozer disappears, though her voice echoes that the "destructor" will follow, taking a form chosen by the team. Venkman explains that this means that whatever they imagine will be manifested as a destroying force, and urges everyone to blank their minds to avoid giving form to the destructor. Rumbling footfalls are heard in the distance, however, and Ray Stantz finally admits that he was unable to keep his mind blank, so he imagined "something that could never, ever possibly destroy us." The destructor arrives in Stantz's chosen form of the giant Stay Puft Marshmallow Man and begins laying waste to the city. To defeat this manifestation of Gozer, the team decides to merge the energy streams of their proton packs and aim at the dimensional portal Gozer came through, at the risk of their own lives. They ultimately follow through with this plan and destroy Stay Puft, who explodes into torrents of melted marshmallow.

The Ghostbusters survive, and Dana and Louis emerge out of the charred remains of their possessors. As they exit the building, the Ghostbusters are met with cheers from the gathered crowd. A dazed Louis is taken away for medical attention while Venkman and Dana kiss as they drive off.