At a formal dinner party in Cape Fear, North Carolina, outgoing 23-year-old Elvis Presley freak Sailor Ripley (Nicolas Cage
) is accused by a goon named Bob Ray Lemon (Gregg Dandridge
) of making sexual advances on Marietta Fortune (Diane Ladd
), the mother of Sailor's 20-year-old girlfriend Lula (Laura Dern
). Lemon announces that Marietta just paid him to kill Sailor and draws a switchblade, but Sailor defends himself, brutally beating and smashing his assailant's head into the floor all in front of Lula, Marietta, and several other people.
Sailor is convicted of manslaughter and sent to the Pee Dee Correctional Facility. Upon his parole, 22 months later, despite orders from her domineering mother that she should never see Sailor again, Lula runs off to reunite with Sailor. Sailor is overjoyed to see Lula, who's brought him his prized snakeskin jacket, a symbol of his "individuality and belief in personal freedom." Sailor and Lula check into a motel, have mad, passionate sex, then go dancing at a local nightclub where he serenades her Elvis-style with "Treat Me Like a Fool." Lula asks Sailor why he never sings her "Love Me Tender," and he explains that he would only sing that song to his wife.
Marietta, who in fact drunkenly propositioned Sailor in the men's bathroom that fateful night in Cape Fear, as well as threatening Sailor with the possibility that he knows "too much," is beside herself with rage. Marietta entreats private investigator and part-time boyfriend Johnnie Farragut (Harry Dean Stanton
) to find Lula and bring her home. When Johnnie fails to find the couple quickly enough for her liking, Marietta also enlists the assistance of Marcelles Santos (J.E. Freeman), another boyfriend and dubious associate, to kill Sailor. Santos agrees to kill Sailor, but only on condition that he gets to kill Farragut, too, because Farragut is on to their criminal dealings. Marietta backtracks and tells Santos to leave Farragut out of it. Santos telephones gangster boss Mr. Reindeer (William Morgan Sheppard), who assigns his assassins Juana (Grace Zabriskie
), Reggie (Calvin Lockhart
) and Dropshadow (David Patrick Kelly
) to handle the killings of both Sailor and Farragut.
Having opened Pandora's Box, Marietta has a crisis of conscience and sets out to try and protect Farragut.
Sailor suspects that Marietta may have put a hit out on him, and decides to break parole by leaving North Carolina with Lula and making a run for California. They first stop in New Orleans where they check into another motel, have a rainbow spectrum of sex, go out dancing, and talk about their personal lives.
Marietta flies out to New Orleans and meets up with Farragut, but when he asks her whether Santos is involved in the hunt for Sailor and Lula, she denies it. Before Marietta can hustle him out of harm's way, Farragut is kidnapped by Mr. Reindeer's hit squad, who kill the hapless investigator in a sexually-charged, ritualistic manner.
On the road late at night, Sailor confesses to Lula that before he met her, he used to work as a driver for Marcelles Santos. He was parked outside of her house the night it went up in flames, a witness to the conflagration in which Lula's father perished. Soon after discussing that so-called accident, Sailor and Lula encounter a car accident on the roadside where a bloodied young woman (Sherilyn Fenn
) dies after stumbling out of the wrecked car. Lula says that it's a bad omen of things to come.
Running short on money, Sailor and Lula stop in the small town of Big Tuna, Texas where they meet several grade-A weirdos including Juana's sinister daughter Perdita (Isabella Rossellini
), local creeps Buddy (Pruitt Taylor Vince
), Timmy (Frank Collison
) and Sparky (Tim Lurie); crazy drunk 00 Spool (Jack Nance
) and the slimy Bobby Peru (Willem Dafoe
Lula reveals to Sailor that she is pregnant from all the sex they've been having for the past few weeks. Bobby, meanwhile, intuits that Lula is pregnant after he pays her a surprise visit while Sailor's away and sees that she's puked on the floor due to morning sickness. Bobby uses Sailor's concern about having to support a family to persuade him to participate in an armed robbery. Lula wants to leave Big Tuna immediately but Sailor tells her that they only need to wait one more day, keeping her in the dark about his plans with Bobby Peru. Unbeknownst to Sailor, Bobby and Perdita are both in league with Mr. Reindeer and intend to make sure that Sailor does not survive the robbery.
The next day, Sailor and Bobby, with Perdita as the getaway driver, hold up a feed store. It goes badly -- a police car shows up and a cop starts questioning Perdita. Bobby shoots the two store clerks although they'd initially agreed that no one was supposed to get hurt, then turns the shotgun on Sailor and reveals that he double-crossed Sailor by giving him a gun loaded only with blanks. Perdita flees when the shooting starts and the cop opens fire on Bobby, hitting him several times. As Bobby stumbles, he accidentally blows his own head off. Sailor surrenders and is sent back to prison. Marietta and Santos arrive and take Lula away back to North Carolina.
Five years and ten months later, Sailor Ripley is once again released from prison. No longer under any parole obligations and having kept in touch with Lula who has relocated to Los Angeles, Sailor decides to visit her. Marietta remains dead-set against her daughter associating with the two-time loser, but Lula confronts her mother angrily. In keeping with the story's The Wizard of Oz
theme, Marietta's photo smokes to signify her diminished power when Lula throws her drink at it, just as the Wicked Witch of the West melted when Dorothy splashed her with water.
Lula takes their young son, Pace (Glenn Walker Harris, Jr.) to meet Sailor when he arrives at the train station. Their encounter is awkward and Sailor decides it would be best if Lula leaves him for good. Lula is crushed but understands. After they part, Sailor is attacked and beaten up by a roving gang.
Knocked unconscious, Sailor hallucinates about a hovering young lady, Glinda the Good Witch of the North (Sheryl Lee
), who tells him that Lula really loves him. "Don't turn away from love!" she admonishes. Sailor comes to, apologizes to the gang members, screams Lula's name and runs back to her convertible, which is immobilized by a monster traffic jam. The family is happily reunited, and Sailor serenades Lula with Elvis Presley's song "Love Me Tender" as the end credits roll.