In a sleepy little town in the New England area, we are introduced to Barbara (Geena Davis) and Adam (Alec Baldwin) Maitland, a couple who have chosen to take a vacation, by staying at home. However, the realtor who sold them the house, named Jane (Annie McEnroe), tries to entice them to sell the house, since it seems too big for just a couple. The Maitlands rebuke her pleas, and head to town to pick up some things. On the way back to their home, they end up almost hitting a dog, which sends them into a river where they supposedly drown.
Unaware that they are dead, the Maitlands return to the house, unsure how they got back so quickly. Adam decides to go back outside to 'retrace their steps,' but instead, finds himself on a strange desert planet, inhabited by striped sandworms. When he returns to the house, Barbara says he was gone for 2 hours, and shows him a book that she found on a table, titled "Handbook for the Recently Deceased."
Time passes relatively quickly, and soon, the Maitlands house is sold (under Jane's watchful eye) to the Deetzes, a New York family composed of Charles (Jeffrey Jones), Delia (Catherine O'Hara), and their daughter Lydia (Winona Ryder). While Charles wishes for peace and quiet from the hustle and bustle of New York, Delia can't stand the simple life, and hires an associate named Otho (Glenn Shadix) to make the house more 'livable' to her tastes.
Adam and Barbara try to scare them, but all their efforts are for naught, as it seems that the living can't see the dead. They take refuge in the attic, where Adam locks the door. However, Lydia manages to find a skeleton key, and trys to open the door. As Adam and Barbara foil her attempts, a tv in the attic comes to life, advertising the services of someone named Beetlejuice (Michael Keaton), who claims to be able to scare the living.
Consulting the handbook, Adam manages to create a door, that takes him and Barbara to a waiting room in the afterlife, filled with others who have met rather gruesome fates. They are then shown to a special room, which reveals their home after it has been redecorated by Delia and Otho. It is here that they are introduced to their case worker named Juno (Sylvia Sidney), who chastises them for their methods on haunting, and cautions them to not take the advice of the person they saw on the television.
Returning to the house, Adam and Barbara dress up in sheets to try and scare Charles and Delia, but their attempt fails again. Annoyed with the spooky noises, Lydia finds them, and the two are amazed when they remove the bedsheets, and realize she can see them! Lydia reveals that she found their handbook, and found a passage that explains how 'live people ignore the strange and unusual,' something she considered herself to be.
The Maitlands try to enlist Lydia to help them get the Deetzes out of their house, but noone will believe her. Not sure what to do, Barbara notices something in model of the town in the attic: a glowing light around a small grave that appears to belong to Beetlejuice. She says his name 3 times, and she and Adam are whisked into the model, where they unearth Beetlejuice's body. Once they've done so, they regret this, as Beetlejuice is a rather crazy, uncouth and insane ghoul. Turned off by his personality, they resolve to try and scare the Deetzes themselves.
At a dinner party that Delia throws for some guests to show her sculptures and other art pieces, the entire group ends up singing 'The Banana Boat Song,' and find the shrimp dish in front of them turning into grasping hands. The Maitlands think they've finally succeeded, only to find that their antics have actually 'amused' the Deetzes. The Deetzes send Lydia to bring them down, and when they refuse, everyone clambers to the attic, demanding that the Maitlands show themselves. They find noone there, but Charles is entranced by the miniature of the town, and Otho finds and takes the handbook.
Leaving the attic, Charles feels that there is a lucrative business venture just waiting to happen. However, his cheerfulness turns to horror, as Beetlejuice transforms into a large snake, freaking out the family, by knocking Otho down the stairs, and dropping Charles to the floor below. Barbara manages to call the snake off by uttering Beetlejuice's name 3 times. Lydia is distraught, thinking that the snake was the Maitlands intending to do more than just scare them.
The Maitlands are then brought before Juno again, who chastises them for breaking a number of rules: having photos taken of themselves, letting Beetlejuice out, and having Otho get ahold of the handbook. Juno then encourages the Maitlands to work harder to scare the Deetzes, and Barbara and Adam contort their features into grotesque forms. However, Barbara has some apprehensions, as she likes Lydia.
Meanwhile, Lydia has grown upset, to the point of writing a suicide letter. Going to the attic to say goodbye to the Maitlands, she encounters Beetlejuice in the model. Beetlejuice tries to convince her that he can help her find the Maitlands, if she says his name 3 times. Lydia is almost tricked into saying this, until she realizes that Beetlejuice was the snake, and doubts if he really can help her find the Maitlands. Just then, Adam and Barbara appear, and Lydia explains what was about to happen. Lydia feeling distraught to be living, tells them of her wish to be dead. Barbara talks her out of these thoughts, and tells her that they've decided to not scare the family, and allow them to stay.
Just then, Otho and Charles appear in the attic as Lydia and the Maitlands hide. Otho and Charles carry Adam's model of the town downstairs, where Charles' business associate Maxie Deen (Robert Goulet) is given an overview of Charles' business idea to turn the town into a paranormal-themed attraction. Charles also requests that Lydia produce the Maitlands for their guests, but when she refuses, Otho explains that he has a way.
Using the handbook and the Maitlands' wedding clothes, he performs a seance that makes the two appear before them. However, this causes the Maitlands to deteriorate, their forms reverting to their decaying corpses.
Frantic, Lydia rushes to the model, and sees Beetlejuice in the graveyard. Begging him to help her, Beetlejuice says so on the condition that Lydia marries him. She agrees to this, and the Maitlands are saved. However, Beetlejuice then holds Lydia to her word, and holds Charles and Delia hostage as 'witnesses,' as Otho escapes.
Both Adam and Barbara struggle to stop Beetlejuice, who sends Adam into the model, and Barbara to the sandworm planet. Through a joint effort, they end up doing away with Beetlejuice, saving Lydia.
In the aftermath, the Maitlands and the Deetzes now co-occupy the house, and Lydia is much more cheerful in her new environment.