Bill Capa (Bruce Willis
) is psychoanalyst to the rich and unhinged in New York City. One day, Michelle (Kathleen Wilhoite
), one of his most disturbed patients, arrives to her therapy session in a particularly fragile state of mind. Bill seems to make light of her problems, and when he flippantly tells her to "look in the mirror," and starts making a phone call in the middle of their session, she reacts by jumping out of the window of his office and falling to her death.
The sight of Michelle's blood pooling, dark red around her bright green dress, causes Capa to suffer from stress-induced color blindness. He loses the ability to see the color red. The title of the film refers to the fact that, instead of red, he sees only shades of gray. His friend and mentor, Dr. Larry Ashland (Jeff Corey
), urges Bill to forgive himself for his patient's death. Bill tells Larry that he's going to take some time off to visit an old college buddy in California and see if that helps give him a fresh start.
Upon arriving in Los Angeles, Bill's friend, fellow therapist and best-selling author Dr. Bob Moore (Scott Bakula
) invites him to join his Monday evening group therapy session. A bit reluctantly, Bill accepts, and meets the members of the group.
Clark (Brad Dourif
) suffers from obsessive compulsive disorder and insists on cleanliness and counting things. Sondra (Lesley Ann Warren
) is a nymphomaniac and a kleptomaniac with a habit of marrying wealthy older men who die. Buck (Lance Henriksen
) is a salty ex-cop who suffers from post-traumatic stress disorder after surviving the brutal murder of his wife and daughter. Casey (Kevin J. O'Connor
) is a sado-masochist whose wealthy, abusive father subsidizes his artistic lifestyle on condition that he remain in therapy. Richie Dexter is a sixteen-year-old boy with a stutter and a gender identity problem, who has had run-ins with the law for drugs. The patients tease each other playfully, exhibiting an easy rapport, and yet the tension generated by some of their interactions hints at a dark side in each of them.
After the session, Bob drives Bill to his luxurious Malibu home in his Mercedes convertible. The house is heavily protected by all sorts of electronic devices, because Bob has had some anonymous death threats, which he believes come from someone in the Monday group Capa just met. Bob quizzes Bill about his impressions of his patients-- he had hoped Bill could use his "tuning fork," a special intuitive sense he has for diagnosing mental illness, to determine which of them might be capable of murder. Bill wonders what Buck might be hiding and singles out Richie as a "genuine nut-case," but didn't detect a murderous vibe emanating from anyone.
A couple of days later, Moore is stabbed to death in his office by a masked figure in black. Police Detective Lieutenant Hector Martinez (Rubén Blades
) suspects one of the patients of the Monday group to be the killer and he asks Capa to inform the group of Moore's death. Capa doesn't want to get involved but agrees to break the news because he can do it with more sensitivity and tact than Martinez would use.
The next day, as Bill is driving Moore's car, he gets rear-ended by a pretty young girl in a jeep. She introduces herself as Rose (Jane March
). As Rose has no driver's insurance, Bill gives her his phone number and address so they can settle the matter later.
Next Monday evening, Bill tells the group about Bob's death. They're shocked and devastated, and ask Bill if he'd be willing to take over the Monday evening sessions because they feel comfortable with him, especially after he shares his own recent, tragic experience.
Martinez debriefs Capa about the last Monday night session. Since no one confessed to Bob's murder, Martinez orders Capa to shut the group down. Capa refuses, as he's just made both a personal and professional commitment to lead the group. Martinez rages at Capa but can't persuade him to abandon the group. He then reveals that he wired Bob's office and listened in on the last session. Capa returns to Bob's place to find that someone has broken in and left a hose running inside of the house, flooding the grounds.
A couple of days later, Rose comes to Moore's house and, feeling a budding attraction, Capa takes her to a restaurant. After dinner, on the sidewalk near the restaurant, they kiss, but Rose leaves abruptly in a taxi, without even giving her phone number to Capa.
Dale Dexter (Andrew Lowery
), Richie's older brother and legal guardian, asks Bill for permission to take Richie out of therapy. Bill reminds Dale that, psychological issues aside, Richie was sentenced by the court to mandatory treatment-- Bill says that he will need to study Richie's file and deal with legal red tape before he can make that kind of decision.
One morning while he is out jogging, Bill finds a live rattlesnake in his mailbox. Fortunately for him, he gets rid of it without being bitten. Martinez comes by and demands more answers, insinuating that Bill is now a suspect. Rose shows up shortly afterwards and since it's their second date, they immediately have sex, first in the swimming-pool, and then in Moore's fancy bedroom (and a few more places in the director's cut).
Bill inquires within the social welfare system about Richie, and discovers that, when Richie was twelve, he was treated by a psychiatrist named Dr. Niedelmeyer.
Meanwhile, we see Sondra return home after a shopping spree with her girlfriend Bonnie. Bonnie, who speaks with an english accent and flirts aggressively with Sondra, turns out to be Rose, Capa's lover, in a red wig and heavy make-up. Bonnie / Rose pitches a fit when Sondra tells her that Capa's on his way, then kisses Sondra on the mouth and rushes past Capa to make a quick exit. Sondra reveals to Capa that Richie was molested as a child but becomes incensed when he asks her if Richie might be violent. She screams that Clark is the one Capa should investigate. After Capa leaves, Sondra has sex with her personal trainer, a beautiful young male.
Bill goes to Dale's workshop. Dale is a successful sculptor and furniture designer. The workshop itself is an old, disused iron factory that boasts a tower several storeys high. Bill tells Dale that he thinks it is a bit premature to take Richie out of therapy, which clearly doesn't sit well with Dale.
Bill pays a visit to Edith Niedelmeyer (Shirley Knight
), Dr. Niedelmeyer's widow, but, when he mentions Richie, she slams her door in his face.
Another Monday rolls around. Bill asks the group about their current intimate relationships. Sondra tells the group about Bonnie, whom she wishes "was a guy," Casey mentions his beautiful new model, Buck describes the sweet and innocent young woman he has met. Richie says that he only has his brother. Clark, baited by Sondra, has a meltdown in group during which he admits that he, too, has a new "somebody" in his life.
Bill checks on Clark who tells him more about this perfect new girlfriend of his. Bill guesses that Clark has been seeing Sondra, and Clark goes on to say that Sondra was so jealous of his girlfriend that she attacked Clark with a butcher knife and then came back the next day and hacked his girlfriend's dress to ribbons. Clark states that Sondra is dangerous. After leaving Clark, Bill is driving around Los Angeles when a mysterious red Camaro with tinted windows gives chase. After his car gets hit several times by the red car, he finally manages to lose it at a railroad crossing.
Bill visits Martinez at his birthday party. Martinez informs Bill that Sondra stabbed her father with a knife and fork, Casey set his father's house on fire, Clark beat his wife so badly she wound up in intensive care and Richie has a history of drug abuse. Martinez claims that he couldn't find anything on Buck, so Bill swings by Buck's place after the party and discovers that his wife and small daughter died in a car-jacking, which Buck believes might've been "payback for something."
When Bill gets back to Bob's house, he's frightened to see that someone's broken in again. He creeps around cautiously until he encounters Rose in the kitchen. She explains that she stole one of the house keys last time she was there. Bill yells at Rose that she doesn't seem to appreciate the gravity of the situation, but feels bad when she breaks down in tears. They eat and then have sex again.
The next morning, Bill learns from Detective Anderson (Eriq La Salle
), one of Martinez's deputies, that Buck discovered that his wife was cheating on him with Martinez two days before she died; that as veteran narcotics agents, both men had a lot of enemies on the street, and that anyone could have ordered a hit on Buck's wife, including Martinez or Buck himself.
Bill has an appointment to meet Casey at his loft, but just before Bill arrives, Casey is strangled and bled to death. Bill breaks into Casey's loft when no one answers the bell. He finds the corpse and also some paintings burning in the fireplace. A face on one of the half-burnt paintings looks a bit like Bonnie. Bill belatedly notices that the puddle of grey paint soaking his jeans is actually Casey's blood.
Meanwhile, Rose (in her Bonnie persona) is out for the evening with Sondra. At Sondra's house, they dance to some music and then spy Sondra's neighbors having sex. This excites the two women and they undress and make out with each other. But Rose / Bonnie stops before it goes any further, sobbing to Sondra that she's "jinxed." Sondra comforts Rose / Bonnie and tells her that she finds her beautiful without the red wig, which she removes.
On another Monday afternoon, Rose appears at Bob's place. She and Bill start looking at Bob's photo albums. Rose abruptly decides that she doesn't want to see any more photos and lures Bill outside to sunbathe in the garden. Later, thinking Bill's in the shower, Rose hurries to remove some pictures from the photo album, but Bill sees her. She runs out of the house and drives away in her car. Bill drives after her, but loses her.
Later that evening, it's time for the Monday group session. Clark, performing his usual counting ritual, notices that one book, which was missing a week before, is now back in place. Bill guesses that kleptomaniac Sondra stole it, and asks her to show him the book. Actually it is Moore's diary hidden inside an art book cover. In the diary, Bill finds a photo Bob snapped of Rose naked. Everyone in the group recognizes the woman in the photo as being his or her own girlfriend. Richie looks at the picture and leaves the room. Martinez arrives and berates everyone in the group for being idiots.
Bill gives Detective Anderson the license number of Rose's car and asks him to find the owner of the car. Detective Anderson gives the name of the owner of Rose's car to his boss, Lieutenant Martinez. As Bill walks near a parking structure, the red car with the tinted windows pushes another car from the top of the structure, and the falling car misses Bill by a few inches.
Bill consults once more with his friend Larry, who questions the wisdom of pursuing a serious relationship with a woman who at best suffers from a multiple personality disorder and could also quite possibly have killed his good friend (and her former lover) Bob Moore, as well as Casey. Bill maintains that he wants to continue to see young Rose.
Bill knocks on Mrs. Niedelmeyer's door again and this time when she slams it in his face, he busts it down, demanding answers. Mrs. Niedelmeyer reluctantly tells Bill that Richie Dexter killed himself four years ago, because her husband, Richie's psychiatrist, molested him.
Bill rushes to Dale's workshop, where he finds Richie sitting in a chair, bloodied and agitated. He takes off Richie's wig and glasses, and (as everyone expected) is it Rose. She explains that after Richie's suicide, her brother Dale forced her to dress and act like Richie, and if she resisted, he would beat and molest her. After "Richie" developed a bad drug problem that got him busted, s/he had to go to the therapy group. She started to feel she wanted to be a girl again, but she didn't dare, at first, to be Rose, so she was Bonnie. She started to be Rose again when she fell in love with Bill.
When Bill tries to get Rose to leave with him, he discovers that her hands have been nailed to the arm-rests of the chair by Dale. He pries the nails up and frees Rose, but Dale comes back and starts shooting at them with his nail-gun. He nails Bill's arm to the wall and is about to kill him when Lt. Martinez appears and points his gun at him. Dale is faster than Martinez and while Martinez is bragging about his detective skills, he nails both of Martinez's hands to the wall. Bill and Rose run away, but Dale, using a forklift, dumps a cabinet on Bill, who pushes Rose out of the way. Rose escapes, but Dale catches Bill and ties him inside a metal cage.
Bill touches a nerve in Dale when he uses his "tuning fork" to figure out that Dale's obsession with turning Rose into Richie must stem from his guilt over having allowed Niedelmeyer to treat Richie, knowing that Niedelmeyer was a sexual predator due to the fact that Niedelmeyer had previously molested Dale himself.
Dale explains to the captive Bill that he killed Moore because Moore was beginning to understand who Richie really was. And he killed Casey because Casey, with his painter's eyes, would eventually perceive that "Bonnie" and "Richie" were the same person. Dale announces his plan to cut Bill into little pieces, but Rose aims the nail-gun at him and kills him with a nail to the head.
Stricken with grief after killing her brother, Rose aims the nail gun at her own head and pulls the trigger-- fortunately, it's out of nails. She runs up the tower in the pouring rain, Bill clambering up after her. When she reaches the platform at the top, she wants to throw herself from it, but Bill catches her and puts her back on the platform, where they start kissing passionately. There is a red beacon flashing in the background and suddenly, Bill can see the real red color of the beacon: he has been cured of his color-blindness by love!
In the final shot, Bill and Rose continue to kiss on the platform in the pouring rain while Martinez's voice manages to reach them loud and clear despite the fact that they're five storeys up in a torrential rainstorm-- he pleads for them to come back downstairs and "Get me out of heeeeeeerrrrre!!!"