Narrated by the main character, Nick Halloway (Chevy Chase) is a devoted bachelor and businessman. After meeting (and subsequently falling for) a family friend of a business associate, Alice Monroe (Darryl Hannah), he drinks himself "silly" and becomes hung over the following morning. With a mandatory business conference breathing down his neck, Nick attends with serious reluctance. In an attempt to relieve him of his pain, he decides to nap in a sauna adjacent to the men's bathroom. Unbeknownst to him, a laboratory within the building devoted to research and experimentation in magnetism has an experiment go haywire. The failed experiment has the consequences of nearly turning every object invisible. This creates widespread panic. Consequently, everyone evacuates the building. However, Nick, who has been sleeping through the entire incident, now finds himself completely transparent, unable to see his body or many tangible objects in the building. Like it or not, Nick is now an invisible man.

Meanwhile, emergency crews turn up at the site – as well as US Government officials, led by the less-than-ethical David Jenkins (Sam Neill) who discovers Halloway and his new found ability. Convinced that Halloway has the potential to work with the CIA as the world's first invisible agent, Jenkins tries to recruit Nick as part of their covert operations and, in the process, proves he will stop at nothing to do so in coldblooded fashion. As the story progresses, Nick's romance with Alice deepens and soon both find themselves on the run from the government and the relentless Jenkins. At the story's conclusion, Halloway realizes that his invisibility can never be reversed. He must now adjust to a new life as a permanently invisible man.