Jenny (played by Susan Strasberg) is a deaf runaway who arrives in San Francisco's Haight-Ashbury district, searching for her brother Steve. She encounters the aptly named Stoney (Jack Nicholson) and his hippie band "Mumblin' Jim" in a coffee shop. The boys are sympathetic, especially when they discover that she is deaf and can only understand others through lip reading. They hide her from the police and help her look for her brother. He has left his apartment with no forwarding address; she has only a postcard from him which reads "Jess Saes: God is alive and well and living in a sugar cube". Meanwhile, the boys are trying hard to improve their music and get more visibility, and are approached by a promoter who says he can arrange for them to perform at "the Ballroom", clearly the Avalon Ballroom or the Fillmore West.
The group discovers an artist friend, Warren (Henry Jaglom), the man who designs the psychedelic posters advertising the band, freaking out badly in his gallery, apparently on STP. He sees everyone, including himself, as walking dead and tries to cut off his own (to him festering) hand with a circular saw. While they help him, Jenny notices a large sculpture resembling abstract flames in a corner and recognizes it as her brother's work. The gallery owner says the artist is known as "The Seeker", a kind of itinerant preacher. He suggests that they ask ex-band member Dave (Dean Stockwell) about The Seeker's current whereabouts.
Dave lives in the attic of a downtown warehouse. He is less than thrilled to see Stoney, but sympathetic to Jenny. The audience learns that Dave left the band because he felt they were too concerned with worldly success and "games", rather than serious focus on music for its own sake. (Some fans have guessed that Dave and his conflict with the band are based on the real-life disputes between Neil Young and Buffalo Springfield. Stockwell's appearance strongly resembles Young's at this period, and the two were friends; Stockwell later appeared in one of Young's experimental films.)
Dave's information leads the gang to a junkyard, where the mystery of "Jess Saes" is revealed; it's a sign reading "Jesus Saves", with some letters missing. The "sugar cube" slogan is painted on the side of a car which Jenny recognizes as her brother's. However, a group of thugs who frequent the junkyard accost the group and reveal that they have it in for The Seeker, for reasons that are never fully explained except that they dislike his street preaching and his themes of love and peace (perhaps they are Vietnam War veterans). They threaten to rape Jenny. Violence ensues, and the group barely escape with their lives. Jenny's friendship with Stoney has become sexual (she does not know that he has a reputation for one-night stands and a refusal to commit to or care about any woman). She attends a mock funeral staged by a large group of hippies, with background music by The Seeds; the theme of their play is that death is not the end, and that love and a refusal to hurt others are what keep us alive. She stays with Stoney in a crowded old house, and finds that everyday hippie life is less than ideal. The residents are all involved in contemplation (with or without drugs), sex, sleeping, dancing, or decorating the place, but nobody cares enough to do any actual cleaning or maintenance. When Jenny tries to wash the mountain of dishes in the kitchen, she finds that the plumbing is broken, but everybody just continues dancing. Frustrated, she interrupts Stoney's band practice to inform him she is going to take a walk. He answers angrily that he has no leash on her. Dave, sitting quietly in the next room, overhears this, and is clearly distressed at the way Stoney treats Jenny. Later, Stoney goes out too, concerned in spite of himself. He ends up at the art gallery, where he hears breaking glass and slips inside to see what is happening.
The Seeker (Bruce Dern) has returned to the art gallery to pick up his sculpture. Challenged by Stoney, he pleads that the work should not be touched; it is actually not meant to be art, but a shrine. He believes that God spoke to him and asked him to create the piece. Told that Jenny is looking for him, he is glad, but he feels it would be best not to see her yet; he is on drugs and wants to be sober when they meet. He further explains that Jenny's deafness is pathological; their mother was cruelly abusive, and burned Jenny's beloved toys. Jenny was violently traumatized and apparently had a stroke; she was deaf from that moment.
The performance at the Ballroom is a success; Mumblin' Jim play, along with the Strawberry Alarm Clock. Steve the Seeker shows up, hoping to see Jenny, but the junkyard thugs are also present(????)and chase him back to his home. Steve runs right behind Jenny without her noticing, since she hears nothing. The group throws a party after the show. Dave appears and remonstrates Stoney over his ambition for commercial success, as well as his cavalier treatment of Jenny. When Stoney saunters off with another woman, Dave stays with Jenny to console her. She sees him put some STP in his fruit juice. He offers himself to her, but Stoney charges in and angrily shouts at Jenny, calling her a "bitch". Heartbroken, Jenny accepts Dave's glass of fruit juice and drinks nearly all of it.
She tells Dave she was only trying to find her brother, and Dave pulls a note from his pocket: "God is in the fire," and an address. Jenny runs out and takes a streetcar in hopes of meeting Steve. Later, Stoney looks for Jenny, and he rouses Dave, who is tripping on STP, to help find her. Half out of his mind, the Seeker attempts to enter his house, but the junkyard thugs pursue him; he eludes them and arrives in his room, where he lights a fire inside his shrine. Soon the entire house is ablaze. Jenny arrives to find a crowd gathering near the house; she runs in just in time to see him standing in the middle of the flames, absorbed in prayer; she calls to him and he sees her, but merely smiles and waves.
In her grief and confusion, she runs up to the roof, hallucinating wildly, and apparently jumps into a reservoir. The screen blacks out, and the audience next sees Jenny standing in the middle of the Golden Gate Bridge, cars coming at her from both directions with their horns blaring. She has her hands over her ears, indicating perhaps that she has regained her hearing, although this is never explicitly stated. Dave and Stoney find her, and Dave,confused and impulsive from the potent psychedelic, runs onto the highway; he shoves her out of the way of an oncoming car and is struck and killed. As he dies, he murmurs that he hopes this, too, will be a good trip. Sickened and angry, Jenny tries to leave, but Stoney grabs her and pulls her into an embrace. The film ends with the two holding each other and crying, while an image of the mock funeral reappears.