Tom Ripley (Matt Damon) is a young man struggling to make a living in late 1950s New York City. One day, while working as a restroom attendant at a fancy Manhattan hotel, he meets a Princeton graduate who bribes him to work at an alumni party at playing the piano because the Princeton guy just broke his hand and cannot play. Ripley accepts. While working at the party, playing the piano and wearing the guy's borrowed Princeton jacket, he is approached by the wealthy Herbert Greenleaf (James Rebhorn), who mistakently believes him to be a Princeton alumnus. He asks Tom to travel to Italy on a job to persuade Greenleaf's errant son, Dickie, to return to the United States. Ripley did not go to college at all and has never even met Dickie, but nevertheless goes along with the arrangement.
Shortly after his arrival in Italy, Ripley meets Dickie Greenleaf (Jude Law) and his girlfriend, Marge Sherwood (Gwyneth Paltrow). He quickly insinuates himself into their lives. While telling the truth about himself and about Mr. Greenleaf's job to bring Dickie back to America (Dickie quickly detests returning to the USA), Ripley lies about going to Princeton or about ever meeting Dickie in the past. Over time Dickie begins to tire of his new friend, resenting Ripley's constant presence and growing dependence, especially after he learns that Tom Ripley has been lying about their days together at Princeton. Ripley's feelings are complicated by his desire to maintain the wealthy lifestyle Greenleaf has afforded him and by his growing sexual obsession with his new friend.
As a friendly gesture to Ripley, Greenleaf agrees to travel with him on a short holiday to Sanremo. The two hire a small boat and go sailing. They begin arguing while on board, with Dickie rejecting and mocking Ripley and his homosexual advances. Enraged, Ripley attacks Dickie, smashing him on the head with an oar and, in the ensuing struggle, accidentally killing him. Horrified by his own actions, Ripley lets the boat drift to shore with Dickie's body in his arms. He then sinks the boat, with Dickie's body still on board, to conceal his crime.
When the hotel concierge mistakes the returning Ripley for Greenleaf, Ripley realizes he can assume Greenleaf's identity. He takes on Dickie's signature and passport, and begins living off his allowance, while at the same time carefully providing communications to Marge to make her believe that Dickie has deserted her. Greenleaf's old friend Freddie Miles (Philip Seymour Hoffman) visits Ripley at what he supposes to be Greenleaf's apartment in Rome. He is immediately suspicious of Ripley. When Miles discovers Ripley's scam, Ripley murders him as well and dumps the body in a local creek.
Over the next few weeks, Ripley's existence becomes a 'cat and mouse' game with the Italian police and Greenleaf's friends. Ripley must frequently alternate between his pose as Dickie Greenleaf and his true identity as Tom Ripley. His predicament is complicated when he has another chance meeting in Rome with Meredith Logue (Cate Blanchett), a wealthy heiress he met on the ship while traveling to Italy, who believes Ripley to be Dickie Greenleaf since Ripley earlier introduced himself as Dickie. Ripley eventually resumes his own identity, forges a suicide note in Greenleaf's name, and moves to Venice.
In succession, Marge, Dickie's father and an American private detective confront Ripley. Marge particularly suspects Ripley of involvement in Dickie's death, and Ripley prepares to murder her. He is interrupted when Marge's friend, Peter Smith-Kingsley (Jack Davenport), enters the apartment.
A little later, Marge, Dickie's father, and the prviate detective all confront Ripley at his apartment in Venice. But luck seems to stay with Ripley when the private detective reveals that Mr. Greenleaf has decided to give Ripley a portion of Dickie's inheritence with the understanding that certain details about his son's past not be revealed to the Italian police or the public. Marge knows that Ripley had something to do with Dickie Greenleaf's dissapearance, but with no evidence to support her accusation, she angrily leaves Italy back for America.
Ripley goes on a cruise with Smith-Kingsley, his new lover, only to discover that Meredith Logue is also on board the cruise with her parents. Logue knows Ripley only as Dickie Greenleaf, and Ripley realizes it will be impossible to keep Smith-Kingsley from discovering that he has been passing himself off as Greenleaf, since Peter and Meredith know each other and could eventually exchange words. Ripley knows that he cannot solve this dilemma by murdering Logue, as she is traveling with a large family who will notice her disappearance.
The movie concludes with a sobbing Ripley killing Smith-Kingsley to protect his secret, throwing his body overboard, and resigning himself to a solitary life without love or acceptance.