Morris Buttermaker (Walter Matthau), an alcoholic and former minor-league baseball player, is recruited by a city councilman and attorney who filed a lawsuit against an ultra-competitive Southern California Little League which excluded the least skilled athletes (including his son) from playing. In order to settle the lawsuit, the league agrees to add an additional team - the Bears - which is composed of the worst players in the whole Little League. Buttermaker becomes the coach of the unlikely team, which includes (among others) a near-sighted pitcher, an overweight catcher, a foul-mouthed shortstop with a Napoleon complex, an outfielder who dreams of emulating his idol Hank Aaron, and a motley collection of other "talent". Shunned by the more competitive teams (and competitive parents), the Bears are the outsiders. They play their opening game, and do not even record an out, with the score at 26 to 0 before Buttermaker forfeits the game.
Realizing the team is nearly hopeless, he recruits a couple of unlikely prospects: First up, is sharp-tongued Amanda Whurlizer (Tatum O'Neal), a skilled pitcher (trained by Buttermaker when she was younger) who is the 12-year-old daughter of one of Buttermaker's ex-girlfriends. At first, she tries to convince Buttermaker that she has given up baseball, but then she reveals that she had been practicing "on the sly". Before agreeing to join the team, Amanda makes a number of outlandish demands (such as imported jeans, modeling school, ballet lessons, etc.) as conditions for joining. Upon hearing her demands, Buttermaker asks, "Who do you think you are, Catfish Hunter?" Amanda responds by asking, "Who's he?" Rounding out the team, Buttermaker recruits the "best athlete in the area," who also happens to be the local cigarette-smoking, loan-sharking, Harley-Davidson-riding troublemaker, Kelly Leak (Jackie Earle Haley). With Whurlizer and Leak on board, the team starts gaining more confidence, and the Bears start winning games.
Eventually, the unlikely Bears make it to the championship game opposite the top-notch Yankees, who are coached by aggressive, competitive Roy Turner (Vic Morrow). As the game progresses, tensions are ratcheted up as Buttermaker and Turner engage in shouting matches, directing their players to become increasingly more ruthless and competitive against each other, going as far as fighting, spiking on slide, or the batter getting hit on purpose.
The turnaround point of the game comes after a heated exchange between Turner's son (and Yankees pitcher) Joey (Brandon Cruz) and the Bears at-bat catcher Engelberg (Gary Lee Cavagnaro). Turner orders his son to walk Engelberg, the only Bears hitter he cannot overcome, despite Joey's wish to give it a try. In response, Joey intentionally throws a wild beanball nearly striking Engelberg in the head. Horrified, Turner goes to the mound and slaps his son. On the next pitch, Engelberg hits a routine ground ball back to Joey who exacts revenge against his father by holding the ball until Engelberg has an inside the park home run. Joey then leaves the game dropping the ball at his father's feet.
Buttermaker - realizing that he has become as competitive as Turner - puts the benchwarmers on the field, thus giving everyone a chance to play. In spite of this, the finish-up brings up the best team-play from the Bears. After loading the bases with smart tactics (two walks and a bunt) they nearly recover a four run difference, with the last runner getting taken out at the last moment.
Having narrowly lost the game at 7 to 6, Buttermaker gives the team free rein of his beer cooler. Although they did not win the championship, they have the satisfaction of having come a long way. The condescending Yankees congratulate the Bears (in a sarcastic tone implying that they really not mean it) telling them that although they are still not that good, they have "guts." Tanner, the shortstop, replies by telling the Yankees where they can put their trophy. The Bears cheer and Lupus overcomes his chronic shyness enough to yell "Wait 'til next year!", then they spray their beers all over each other. The movie ends with a field celebration by the Bears that makes it look as if they won the game.