The Hess family lives on a farm in Doylestown, Bucks County, Pennsylvania. Graham Hess (Mel Gibson) is a former Episcopal priest who lost his faith in God after his wife, Colleen, died in a horrific traffic accident caused by a veterinarian named Ray Reddy (played by M. Night Shyamalan). Additionally, Graham cannot come to terms with his son Morgan's (Rory Culkin) asthma condition which causes great suffering. No longer practicing religiously, Graham and Morgan live with Graham's daughter, Bo (Abigail Breslin), who has a strange habit of leaving unfinished glasses of water around the house, and Graham's younger brother, Merrill (Joaquin Phoenix), a former minor league baseball star who never made it to the big leagues because of a habit of swinging at whatever pitch came his way.
Things are fairly uneventful in Graham's life until a mysterious crop circle appears in his cornfield. Its origin and purpose is unknown; some townspeople speculate that it may be a prank while a few others think that it may have been created by intelligent alien life-forms. Meanwhile, reports of violent animal behavior has spread across town, supported by one of the Hess' dogs trying to attack Bo and Morgan.
As the story progresses, it becomes clear that Graham's farm is under watch. One night, he and Merrill chase a tall, dark figure who was spying on them from the roof of their barn. The mysterious being disappears into the crops, moving faster and disappearing far more easily than anyone can explain. Soon Graham and his family are shocked to learn that similar crop circles have suddenly appeared all over the world in ways too quickly to be merely a grand, elaborate hoax. Morgan takes a liking to a sheriff's radio walkie-talkie and she tells him that he can use a baby monitor but it will only work one way. He finds Bo has an old baby monitor in the basement and decides to take it into town. On their return home, strange noises resembling bubbling and clicking come from the baby monitor. Morgan, believing the sound to be aliens talking, climbs on the car roof to get a better signal. He gets the family to join hands with him to boost the signal, but the noises soon go away.
That evening, Graham, investigating the other German Shepherd dogs barking, goes into the crop circle to investigate. There he hears the unusual clicking noises and glimpses what appears to be a long green leg disappearing into the corn. Startled, he sprints back to the house before looking back. He then tells Bo, Morgan and Merrill that they can turn on the television, something he had steadfastly objected to earlier. They turn on the news to discover that large, mysterious and unidentifiable lights have been spotted over Mexico City.
That night, Graham has a conversation with Merrill about his own faith. It's revealed that Graham no longer believes in God following the accident. He then says that there are "two kinds of people: those who see signs, miracles, and those who see coincidences. Which kind are you?" When Merrill asks him the same question, Graham does not answer.
Later, there is a flashback that shows Graham approaching the scene of an accident, still in his clerical suit. He sees his wife pinned to a tree by a truck, and the officer tells him that his wife won't live for long, being held alive only by the truck pinning her into place. The flashback ends.
The following morning, Merrill sees startling video footage on the news of an alien that was spotted during a boy's birthday party in Passo Fundo, Rio Grande do Sul, Brazil. Graham takes a short visit to Ray Reddy's house, and finds Ray staring blankly out his car window and bleeding. Ray apologizes for the accident that occurred, tells Graham that "they don't like water" and that a lot of people have gone to the lake. Before driving away and leaving Graham in the driveway, Ray tells him that he trapped "one" in the pantry. In an extended scene, Graham investigates. He takes a carving knife from the kitchen and attempts to use it like a mirror to catch the intruder's reflection from under the pantry door. When he does so, fingers that are not human try to claw at his hand from the other side. Startled, Graham uses the knife to cut off the fingers and quickly departs.
Graham returns home and proposes to his family two options: go to the lake in hope that the aliens do not like water, or stay home. After a family vote (in which Graham says that his vote counts for two on behalf of his dead wife) the family decides to stay home and they board up all the doors and windows. While Graham and Merrill do this, Morgan and Bo watch the news and find out that the mysterious airborne lights are now visible over approximately 274 cities worldwide, appearing within a mile of crop signs, and the appearances are growing rapidly.
Before the family finishes boarding up the house, they decide to have their last full family meal, choosing their favorite foods. In an emotional scene, Graham holds his children and brother while they all cry, realizing how much the death of Colleen has affected them and how scared they are. Suddenly, the baby monitor begins making the familiar, mysterious noises. Graham checks the television only to see it's no longer broadcasting.
They then board up the last doors and windows and go to the living room, waiting for the aliens. Their dog, who was accidentally left outside, begins to bark alarmingly, but is quickly silenced with a yelp. Soon after, something can be heard climbing onto the roof and breaking into the attic. When Merrill realizes that no one boarded up the attic access door in the ceiling, the family decides to hide in the basement and use a mattock to prop the basement door closed. Graham and Merrill manage to ward off an attack. However, something finds a way in through a coal shaft and grabs Morgan's neck, but is repelled, resulting in Morgan having an asthma attack.
The next morning, they hear on the radio that a method of fighting the invaders has been developed and they are now retreating, even leaving behind their wounded. Graham decides to venture out for medicine to treat Morgan's asthma attack the previous evening. Seeing that there is no signal coming in from the walkie-talkie, Graham and the family head upstairs. Suddenly and unexpectedly, they come face to face with an alien for the first time and it grabs Morgan before anyone can react.
As the alien holds Morgan hostage, the remainder of Graham's flashback to Colleen's death is revealed: she is still coherent as she dies and tells Graham that she loves him, to look after their children, and to tell Merrill to "swing away," referring to his love of baseball.
Back in the present, Graham sees Merrill's trophy baseball bat on the wall and tells Merrill to "swing away." Merrill grabs his bat and attacks the alien. As Merrill moves in, Morgan has another asthma attack at the same moment the alien sprays gas into the boy's face. Graham then rescues Morgan and Merrill quickly realizes that water is deadly to the alien. Merrill uses the unfinished glasses of water Bo left all over the house to defeat the alien while Graham takes Morgan outside and administers his asthma medication. Morgan soon recovers, his asthma attack having prevented him from inhaling the alien gas.
Realizing the Colleen's dying words meant something after all, and that they actually saved his remaining family's life, Graham's faith is restored. The final scene shows winter weather outside as Graham is back in his clerical suit preparing for church.