Bill Capa (Bruce Willis) is a rich and well-known psychoanalyst in New York. One day, Michelle (Kathleen Wilhoite), one of his most disturbed patients, gets very angry with him, and when he answers back by telling her to look at herself in the mirror, she commits suicide by jumping from his office window high in a building (compare that to the fall at the beginning of Vertigo which precipitates the phobia in the James Stewart character).
The sight of the bloody body of his patient, clad in a bright green dress, causes Capa to suffer, bizarrely, from stress-induced color blindness concerning the color red. The title of the film refers to the fact that, instead of red, he sees only shades of gray. His old friend and mentor, Dr. Larry Ashland (Jeff Corey), tells him it's going to take time, but he would eventually be normal again.
To restart his hectic life (he is divorced and has never been able to have another stable relation again), Capa travels to Los Angeles, California, to stay with a friend, fellow therapist and best-selling author Dr. Bob Moore (Scott Bakula). It's a Monday and Moore has his usual group therapy session. He asks Capa to join them. A bit reluctantly, Capa accepts, and meets the members of the group.
Clark (Brad Dourif) suffers from obsessive compulsive disorder and insists on cleanliness and counting things. We'll learn later that he can also be violent and he divorced because he beat up his wife.
Sondra (Lesley Ann Warren) is a nymphomaniac an a kleptomaniac. We'll learn later that she stabbed her father with a knife and fork and one of her husbands died of unnatural causes.
Buck (Lance Henriksen) is an unsociable ex-cop, whose wife and daughter were brutally murdered and the case is still unsolved.
Casey (Kevin J. O'Connor) is the arrogant son of a very wealthy man. He paints sado-masochist works of art and he once burnt down his father's house.
Richie Dexter is a sixteen-year-old boy with a stutter and a gender identity problem, who would rather be a woman. We'll learn later that he also has a record for drugs.
During the session, they all tease each other, and Richie even leaves the room after a small fight with Casey, but he comes back later.
After the session, Moore takes his friend to his luxurious house in his luxurious car. The house is heavily protected by all sorts of electronic devices, because Moore has had some anonymous death threats, which he believes come from someone in the Monday group Capa just met.
But, a couple of days later, Moore is stabbed to death in his office by a masked figure in all-black clothing. Police Detective Lieutenant Hector Martinez (Ruben Blades) suspects one of the patients of the Monday group to be the killer and he asks Capa to tell the Monday group about Moore's death.
Next day, as Capa is driving Moore's car, he gets hit by another car, whose driver is a very pretty young girl, whom she introduces herself as Rose (Jane March). As the girl has no insurance, Capa gives her his phone number and address, so they can settle the problem later.
Next Monday evening, Capa tells the group about Moore's death. They take it very hard, but they all ask Capa to take over the Monday evening sessions.
A couple of days later, Rose comes to Moore's house and Capa takes her to a restaurant. After dinner, on the sidewalk near the restaurant, they start kissing a little, but Rose leaves abruptly in a taxi, without even giving her phone number to Capa.
Dale Dexter (Andrew Lowery), Richie's brother, who is about ten years older than him, and who is his official guardian, asks Capa to take Richie out of therapy. But Capa reminds him that, after his legal problems, Richie was sentenced by the court to mandatory treatment, and Capa has to call his probation officer, before he can take a decision.
One morning while he is out jogging, Capa finds a live rattlesnake in his mailbox. Fortunately for him, he gets rid of it without being bitten.
A little later, Rose comes to see him and they have sex, first in the swimming-pool, and then in Moore's fancy bedroom.
Capa inquires about Richie, and discovers that, when he was age 12, he was treated by a psychiatrist named Dr. Niedelmeyer.
Meanwhile, Sondra has a girlfriend, named Bonnie, whom she keeps talking about. But we discover that after meeting them after a shopping spree, the English-accented, redhead Bonnie and Rose, Capa's lover, are the same person. Bonnie/Rose makes a quick exit when Capa arrives to talk to Sondra, who is a bit disturbed by "Bonnie" flirting with her. Sondra still has sex with her "physical trainer", who is a beautiful young male. Later, Sondra tells Capa that Richie was molested as a child.
Capa goes to Dale's workshop. Dale is a very successful wood-sculptor, who makes fancy pieces of furniture, which he sells very well. The workshop itself is a large old disused factory, that still kept its tall chimney. Capa tells Dale that he thinks it is a bit premature to take Richie out of therapy, which doesn't seem to please Dale.
Capa 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 group session. Bill asks them about their current intimate relationships. Sondra mentions her new girlfriend, Casey mentions his new model, Buck mentions the new young girl he has met. Richie says that he only has his brother. Clarks reluctantly admits that he has a new and young girlfriend.
Capa is driving around Los Angeles, when he gets chased by a red car with tinted windows, so one cannot see who's inside the car. After his car gets hit several time by the red car, he finally gets rid of it at a railroad crossing.
When Capa gets back to Moore's house, he finds Rose cooking for him. She explains she stole one of the house key last time she was there. They eat and then have sex again.
The next morning, Capa learns from Detective Anderson (Eriq La Salle), one of Martinez's deputies, that Martinez was Buck's deceased wife's lover.
Casey gets strangled to death in his painter's workshop. Shortly after the murderer's departure, Capa, who had an appointment with Casey, breaks in his workshop, finds the corpse, and also some paintings burning in the fireplace. A face on one of the half-burned paintings looks a bit like Rose.
Meanwhile, Rose (in her Bonnie persona) travels with Sondra whom are nightclub hopping together. She clearly flirts with Sondra as she drives her car at high speed. At Sondra's house, they dance to some loud music and then stop when they see a couple through a window in the next house having sex. This prompts Rose/Bonnie to seduce Sondra whom they undress and make out with each other. But Rose/Bonnie stops herself before it goes any further, for she tells Sondra that she does not want to take advantage of her. Sondra comforts Rose/Bonnie as well as removing her long red wig.
Another day or two later, Rose comes to Capa's place. They start looking at Moore's photo albums, when Rose abruptly stops him and goes outside to sunbathe in the garden in the nude. While Capa pretends to be is in the shower, Rose takes some pictures out of the photo album, and runs away in her car. Capa tries to run after her, but looses her.
Later in the evening, it is the Monday group session. Clark, who counts everything, notices that one art book, which was missing a week before, is now back in place. Capa, who understands that kleptomaniac Sondra stole it, asks her to show him the book. Actually it is Moore's diary hidden inside an art book cover. In the diary, Capa finds a picture of Rose naked. Everyone in the group recognizes Rose as being his or her own girlfriend. Richie looks at the picture and leaves the room.
Capa gives Detective Anderson the license number of Rose's car and asks him to find the owner of the car.
As Capa walks near a car-parking building, the red car with the tinted windows pushes another car from the top of the building, and the falling car misses Capa by a few inches.
Detective Anderson gives the name of the owner of Rose's car to his boss, Lieutenant Martinez.
After another visit to the uncooperative, Mrs. Niedelmeyer, she reluctantly tells Capa that Richie Dexter killed himself four years ago, because her husband, Richie's psychiatrist, molested him.
Capa rushes to Dale's workshop, where he finds Richie in a bloody mess. He takes off Richie's wig and glasses, and (as expected) is it Rose. She explains that, after Richie's suicide, her big brother Dale forced her to dress like Richie, and look like Richie, and then he molested her. After Rose, impersonating Richie, got busted and 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 Capa.
When Capa wants to take Rose away, he discovers that she has been nailed to her chair by Dale. He takes the nails off. But Dale comes back and starts shooting them with his nail-gun. He nails Capa's shirt on the wall. He wants to kill him when Lt. Martinez walks in and points his real gun at him. But Dale is faster than Martinez and nails both of his hands on the wall. Capa and Rose run away, but Dale, using a big power machine, makes several shelves fall on them. Rose escapes, but Dale catches Capa and ties him inside a metal cage.
Dale explains to the captive Capa 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, was beginning to understand that "Bonnie" and "Richie" were the same person. Dale starts an electric saw to cut Capa into little pieces, when Rose shoots the nail-gun at him and kills him with a nail to his head.
Shocked after killing her own brother, Rose wants to kill herself, but fortunately, the nail-gun stops working. She runs outside in the pouring rain to the high chimney towering above the building, and starts climbing it. When she reaches the platform at the top of the chimney, she wants to jump down from it, but Capa catches her and puts her back on the platform, where they start kissing each other very passionately. There is a red beacon flashing in the background and suddenly, Capa can see the real red color of the beacon: he has been cured from his color-blindness by love.
In the final shot, Capa and Rose keep on kissing passionately on the platform in the pouring rain while Martinez is yelling for them to come back down and un-nail him.