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. Ripley's personal life is soon revealed after the party where he lives in a small, two-room apartment in a rundown part of the city. His home town and orgins are unknown. It is implied that several years earlier, Ripley came out as a homosexual to his parents who reacted by throwing him out of their house and severing all ties with him. Now alone, Ripley struggles to get by without family support as well as search for his one true love as an outlet for his loneliness.
On the ship traveling across the Atlantic to Europe, Ripley meets a young and wealthy heiress named Meredith Logue (Cate Blanchett). She tells him that she is meeting her parents in Italy who are already there on holiday, and Ripley introduces himself as 'Dickie Greenleaf' and play acts as the man he is going to Italy to find and bring back to America. After the short talk, Ripley comments in a voice-over on his choice to impersonate Dickie to Meredith by saying: "it is better to be a fake somebody then a real nobody".
Shortly after his arrival in Italy, Ripley meets Dickie Greenleaf (Jude Law) and his girlfriend, Marge Sherwood (Gwyneth Paltrow) while they are on a beach near Anzio. 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 and privileged 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 San Remo. 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. (Tom Ripley has the natural ability to forge anyone's handwritten signature just by looking at it, as well as perfectly mimicking anyone's voice just by hearing it). 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 who are looking for Dickie. Ripley must frequently alternate between his charade 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, 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. Ripley rents an apartment under his real name for a one-year lease and plans to lay low until his lease and visa expires and he can then return to the USA and rebuild his life.
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 English childhood friend, Peter Smith-Kingsley (Jack Davenport), enters the apartment. Ripley is immediately smitten with this new man and after Marge leaves, he asks Peter out to dinner. Peter accepts.
At the climax, 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 sizeable 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 disappearance, but with no evidence to support her accusation, she angrily leaves Italy to go back to America.
A little later, Ripley goes on a cruise with Peter 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 he soon learns that 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 returning to his cabin after killing Peter Smith-Kingsley to protect his secret and throwing his body overboard. Although Tom Ripley knows that he has gotten away with his crimes and will never be brought to justice, he has sadly resigned himself to a solitary life without love or acceptance.