The SS Poseidon, a trans-Atlantic passenger steamship slated for retirement, is making its way across the Atlantic from New York City to Athens on its last voyage. On the bridge, company representative Linarcos (Fred Sadoff) orders the ship's master, Captain Harrison (Leslie Nielsen), to empty ballast and proceed at full speed, against the Captain's better judgement.
Meanwhile, Detective Lieutenant Mike Rogo (Ernest Borgnine) and his ex-prostitute wife Linda (Stella Stevens)--seasick, like much of the passengers--receive an invitation to the captain's table. Reverend Frank Scott (Gene Hackman), a priest questioning his faith, delivers an unnerving sermon at Sunday service. Susan Shelby (Pamela Sue Martin) and her younger brother Robin (Eric Shea) are traveling to meet their parents. Robin is interested in how the ship works and frequently visits the engine room. Retired hardware store owner Manny Rosen (Jack Albertson) and his wife Belle (Shelley Winters) are going to Israel to meet their two-year-old grandson for the first time. Haberdasher James Martin (Red Buttons) is a love-shy, health-conscious bachelor. The ship's singer, Nonnie Parry (Carol Lynley) rehearses for the New Year celebration with her band, which includes her brother Teddy on drums.
That evening, New Year's Eve, everybody gathers in the dining room to celebrate. Captain Harrison is called back to the bridge because of an emergency report of an undersea earthquake near Crete. Harrison receives word from the lookout that there is a huge wave heading towards them. He immediately issues a mayday, but it is already too late. The wave hits the bridge, drowning Harrison, Linarcos and other ship's officers. The ship rolls over, killing and injuring most of the people on board.
After the capsized derelict steadies, the surviving passengers and crew in the dining room take stock of their predicament. Robin looks for his sister, who has ended up under a table attached to what is now the ceiling. Scott assembles a team to hold a tablecloth that will cushion her fall and coaxes Susan to jump to safety. Acres, an injured waiter, is trapped at the galley door now high above them. Scott seizes on this, saying that rescue will be found 'upwards', at the outer hull, which is now above water. Robin confirms this, telling the group that the steel plating near the aft propeller shaft is just one inch thick. After some more talking and discussing, Manny, Belle, Mike, Linda, Nonnie, Susan, Robin, Acres, and Martin reluctantly agree to go with Scott. The group need something to climb up to Acres, so they eventually agree to use the Christmas tree as a makeshift ladder. Scott tries to convince more passengers to join his group, but all remain where they are in hopes of rescue.
Just after the small group reaches the galley, there is a series of explosions and seawater begins to flood the ballroom. The survivors left behind rush to the Christmas tree, but the weight of everyone trying to climb at once pulls it over into the rising water. Scott, the last to leave, sadly closes the kitchen doors on the desperation below.
Acres and Scott find the galley, but a warning light is on and the fire door, hot to the touch, has been shut. Scott enters the incinerated kitchen to investigate, returns, and the survivors pick their way through to a staircase on the other side. Scott climbs the ramped underside of the stairs first and he and Martin use a salvaged firehose to pull Rogo and Acres up. While Rogo pulls the others up, Scott and Acres go ahead and find the only exit to 'Broadway' (the main passageway of the ship) is blocked. Acres suggests an access tunnel to the funnel shaft. Scott undogs the opening and returns for Linda, Martin and Nonnie. Just then, water floods the staircase and the now-panicked survivors race to the tunnel.
Temporarily safe, Scott leads them to an access tunnel. Rogo had been instructed to look after everybody but, just as Martin and Nonnie climb into the hole, water begins to fill the corridor. They make it into the funnel and began to climb up with Acres above them. Suddenly, the ship rocks from another series of explosions and Acres falls into the churning water and is lost. Rogo makes an attempt to save him, but the shaft explodes and forces him to abandon Acres.
While climbing out of the shaft and into 'Broadway', Scott and Rogo argue heatedly over the loss of Acres when their group meets a larger band of survivors. These are led by the ship's medic and are heading towards the bow. Rogo argues with Scott about which direction to go and gives Scott only fifteen minutes to go aft to find the engine room. Everybody else looks for supplies. Scott and Susan (who has a crush on the charismatic Reverend) find the hatch that leads to the engine room. Scott tells Susan to return to the others and go forward if he's not back in five minutes. After waiting, Susan tells the others the bad news, but Scott reappears and announces he has found the way to the engine room.
While Susan shows the survivors where to go, Scott notices that Robin is missing. He finds Robin just as the water begins to flood Broadway. They race to the hatch and make it up just as the water floods the corridor.
The group finds the engine room is on the other side of a flooded corridor, so someone must swim through with a line so the others can find a way across. Belle, a former trained swimmer, claims that she could swim under it, but Scott refuses and dives in with the line. Halfway through, a panel collapses on Scott and traps him. The survivors notice something is wrong and Belle dives in to save him. She finds Scott and they make it to the other side. As Scott secures the lifeline, Belle suddenly has a heart attack and collapses. With her last breath, she tells Scott to give her "Chai" pendant (representing the Hebrew sign for life) to her husband who in turn will give it to her grandson. Scott weeps at her loss.
Rogo swims over during the delay to make sure Belle and Scott are okay. When he surfaces, he sees Belle's death, and returns to the other side. Rosen suspects something is wrong and swims to the other side only to find his wife's lifeless body. A few minutes later, the others make it across and find Manny in tears. Initially he is unwilling to go on, but Scott gives him Belle's Chai pendant, reminding him that he still has a reason to live.
Scott continues aft and finds the propeller shaft room's watertight door 'below' a steam valve. He returns and leads the survivors across a catwalk to the door, but there is another series of explosions and Linda falls to her death, presumptively of a broken neck. An infuriated and heartbroken Rogo blames her death on Scott, calling him a "lying, murderous son-of-a-bitch."
More explosions rupture a large pipe which releases clouds of scalding-hot steam that block the group's path to their escape. Scott, outraged about the three deaths and this final obstacle, screams at God that he has betrayed the survivors. He leaps and grabs onto the burning-hot valve wheel to shut off the escaping steam. Hanging from it, Scott slowly turns off the steam, all the while cursing God. The helpless Scott tells Rogo to lead the group on, then lets go of the wheel and is lost to the flaming, oily water below. Susan, in anguish, tries to follow him.
Rogo finally leads the remaining survivors--Rosen, Martin, Nonnie, Susan and Robin--through the watertight door and into the propeller shaft room, but they find no rescuers. Suddenly, they hear a noise outside the ship. They bang on the metal hull to get the rescuers' attention and, after several frantic attempts, finally get a response. The rescuers cut a hole through the hull using a blow torch and help the group from the ship. The survivors, the only six alive after the disaster, fly off to safety by helicopter.