The film opens with newsreel footage, including the farewell address in 1961 of outgoing President Dwight D. Eisenhower, warning about the build-up of the "military-industrial complex". This is followed by a summary of John F. Kennedy's years as president, emphasizing the events that, in Stone's thesis, would lead to his assassination. This builds to a reconstruction of the assassination on November 22, 1963. New Orleans District Attorney Jim Garrison (Kevin Costner) subsequently learns about potential links to the assassination in New Orleans.
Garrison and his team investigate several possible conspirators, including private pilot David Ferrie (Joe Pesci), but are forced to let them go after their investigation is publicly rebuked by the federal government. Another witness is Willie O'Keefe (Kevin Bacon), a male prostitute serving five years in prison for soliciting, who reveals he witnessed Ferrie discussing Kennedy's assassination with Oswald, and a group of Latin men. As well as briefly meeting Oswald, O'Keefe was romantically involved with a man he knew as "Clay Bertrand" also known as Clay Shaw (Tommy Lee Jones). Another one of the witnesses is Jack Martin (Jack Lemmon), a private investigator who worked with Guy Banister (Ed Asner) at Banister's private investigation office. Banister is a career member of the FBI and a private investigator. Russell B. Long (Walter Matthau), a Democrat senator, orders Garrison to close the case. Kennedy's alleged assassin Lee Harvey Oswald (Gary Oldman) is killed by Jack Ruby (Brian Doyle-Murray) before he can go to trial two days after the assassination, and Garrison closes the investigation.
The investigation is reopened in late 1966 after Garrison reads the Warren Report and notices what he believes are numerous inaccuracies and conflicts. Garrison and his staff interrogate several witnesses to the Kennedy assassination, and others who were involved with Oswald, Ruby, and Ferrie. Upon Garrison's informal questioning, Shaw denies any knowledge of meeting Ferrie, O'Keefe or Oswald, but he is soon charged with conspiring to murder the President.
In Dallas, others come forward, including Jean Hill (Ellen McElduff): she tells the investigators that she witnessed shots fired from the grassy knoll and she heard four to six shots total, but Secret Service threatened her into saying only three shots came from the book depository; the implication is that changes that were made to her testimony by the Warren Commission. Garrison and a staff member also go to the sniper's location in the Texas School Book Depository and aim an empty rifle from the window through which Oswald was alleged to have shot Kennedy. They conclude that Oswald was too poor a marksman to make the shots, and two of the shots were much too close together, indicating that two additional assassins were also involved.
Another person comes forward named Rose Cheramie (Sally Kirkland), a Dallas prostitute who was allegedly beaten up by Jack Ruby's bodyguards. She tells Garrison that she was taken to a clinic where she pleaded to the doctors that the Mafia was planning on killing President Kennedy.
After discovering electronic surveillance microphones that had been planted in his offices, Garrison meets a high-level figure in Washington D.C. who identifies himself as "X" (Donald Sutherland). "X" suggests there was a conspiracy at the highest levels of government, implicating members of the CIA, the military-industrial complex, the Mafia, and Secret Service, FBI, and even Kennedy's vice-president, Lyndon B. Johnson, as either direct co-conspirators, or, as having motives to cover up the truth after the assassination. "X" explains Kennedy was assassinated because his foreign policy would have meant diminished profit for the military-industrial complex, and enraged high-ranking military officials who viewed such diplomacy as weakness. Kennedy ordered control of secret para-military operations to be removed from the CIA and handed over to Department of Defense Joint Chiefs of Staff. This would have diminished the agency's power. Further, the Mafia had helped Kennedy win the 1960 election as a favor to his father, Joseph P. Kennedy, Sr, who had done business with the Mafia dating back to the 1920s, and felt betrayed that he had let his brother, Robert F. Kennedy, continue his crusade against the Mob. Furthermore, the Mob wanted revenge for the April 1961 Bay of Pigs fiasco, which they had helped fund and support in order to get their Cuban casinos their biggest moneymakers back from the hands of the Castro government.
"X" reveals how his superior, General "Y", had "X" sent on a trip to Antarctica just before the assassination. One of "X"'s duties was to supplement presidential security. He points out all the lapses in security during JFK's fatal trip to Dallas: the open windows along the route, the hairpin turn from Houston to Elm which slowed the limousine, and bystander activities which would not have been allowed. "X" suggests he was ordered out of the country in order to strip away the normal security measures he would have had in place during Kennedy's fateful trip to Dallas.
On his way back from Antarctica, "X" touches down in New Zealand. He reads a local newspaper which mysteriously presents a full dossier on Oswald and his guilt in Kennedy's death. This was hours before Oswald would be charged with the crime and anyone investigating the case knew much about him. "X" views this as clear proof of a cover story of the type used by CIA black ops. In other words, CIA assets in the media were being used to persuade the public of Oswald's guilt.
"X" further states that Kennedy was intent on pulling U.S. troops from Vietnam by the end of 1965 as evidenced by National Security Order 263. This was countermanded immediately by Kennedy's successor, Lyndon Johnson, with National Security Order 273. Therein, concludes "X", lay the foundation of the Vietnam War. "X" encourages Garrison to keep digging and make further arrests.
Two of Garrison's staff, one of whom is Assistant District Attorney Susie Cox (Laurie Metcalf), quit the investigation, doubting his motives and methods. Garrison's marriage is strained when his wife Liz (Sissy Spacek) complains that he is spending more time on the case than with his own family. After a sinister phone call is made to their daughter, Liz accuses Garrison of being selfish and attacking Shaw only because of his homosexuality. In addition, the media launches attacks on television and in newspapers attacking Garrison's character and criticizing the way his office is spending taxpayers' money. Some key witnesses become scared and refuse to testify while others, such as Ferrie, die under suspicious circumstances. Before his death, Ferrie tells Garrison that he believes people are after him, and reveals there was a conspiracy around Kennedy's death that involved co-conspirators that were involved in the CIA operation named Operation Mongoose.
In June 1968, fellow Assistant District Attorney Bill Broussard (Michael Rooker) meets Garrison at the New Orleans airport where Garrison is boarding for Phoenix, Arizona and tells him the Canadian mob will attempt to assassinate him and is about to get Garrison some serious protection when Garrison confronts Broussard about his orders not to pass rumors about someone going to be killed. Broussard tries in vain to get Garrison to listen, but Garrison refuses, dismissing it as "paranoid garbage." He accuses Broussard of disobeying orders and decides to take him back to New Orleans as punishment. Broussard tries to apologize, but Garrison is too busy to accept it. After a few minutes, he has to flee from a public restroom when he hears strange noises in the adjacent stall and is approached by an unknown man who pretends to be a friend of Garrison's. After Garrison returns to New Orleans, he and his staff discovered that Broussard has joined the FBI and disappeared from his apartment. They argue about the real reason why Shaw has been brought to trial. After Liz retires, he sees Robert Kennedy on TV and witnesses Kennedy's assassination. Garrison, who predicted it, and Liz, whose faith in her husband is renewed as a result, reconcile.
Clay Shaw's trial takes place in January-March 1969. Garrison presents the court with further evidence of multiple killers while attempting to debunk the single bullet theory, proposes a scenario involving three assassins who fired six total shots, but the jury acquits Shaw on all charges. However, the DA's office wins a conviction of perjury against Dean Andrews, Jr. (John Candy), an eccentric lawyer who repeatedly claimed that an alleged phone call made by Shaw to him in which Andrews was asked to represent Oswald in the assassination case was false. The film reflects that the jury's members publicly stated that they believed there was indeed a conspiracy behind the assassination of JFK, but there was not enough evidence to link Shaw to that conspiracy. The film ends with Shaw acquitted of those charges, while Garrison states he'll continue to find out what else may be there in the cover up.
In the end credits, it is mentioned that Clay Shaw died of lung cancer in 1974, but in 1979 Richard Helms testified under oath that Clay Shaw had, in fact, been a part-time contract agent of the Domestic Contacts Division of the CIA.
The end credits also state that secret records related to the assassination will be released to the public in 2029.