In a New York City apartment a young boy named Josh Morrison (Austin Lynd Myers) watches through his telescope an approaching object coming from the sky. It is a baseball-sized metal ball which flies through the window of his room. He keeps it and shows it at school in a science class presentation. Some months later, on Liberty Island a massive fireball crash lands. The fireball is actually a Human sized spaceship (Eddie Murphy). It is controlled by 100 aliens, each one inch tall. Its captain (also played by Murphy and looking like Dave) pilots the spaceship along with his crew from inside its head. For people the spaceship seems fairly human, but odd and with superpowers. A superstitious cop named Officer Dooley (Scott Caan) is desperately searching for the ship.
The aliens are seeking a way to save their planet, Nil, from an energy crisis. For that they need salt, which they plan to produce by draining the Earth's Oceans using the metal ball, so they have to recover it. Through a car accident in which the spaceship is hit by the car of Josh's single mother Gina Morrison (Elizabeth Banks), the spaceship befriends Gina and Josh, telling them its name is Dave MingChang and sees the ball on a photograph. Josh tells him that is was taken from him by a bully. Directed to him by Josh, Dave takes the metal ball back from the bully.
The Captain spends time with Josh and Gina, and realizes that humans are more advanced than they thought, having feelings and love. He decides to cancel the plan of draining the oceans, because of the damage to the Earth. Number 2 (the second in command on the spaceship) disagrees, takes over command, and imprisons the captain (Number 1). Commander Number 3 (Gabrielle Union) is secretly in love with Number 1 and becomes jealous of Gina. She first cooperates in the change of command, but later agrees with Number 1. Number 1 and Number 3 are both expelled from the spaceship, but manage to reenter it and convince the crew that the captain should become in charge again. In the meantime one crew member, Number 17 (Kevin Hart) drunk from the alcoholic drink Dave has taken, takes a pretty female crew member and jumps out. Meanwhile, The Number 1 apologizes to Number 3 for ignoring her. He admits that he does love her and wants to be with her. Back at the police station, Dooley discovers Number 17 in his coffee and steals him to find out information from him.
The police know from the impression of Dave's face in the dirt on the crash site what he looks like, and they arrest him for investigation. Dave breaks out, and the police try to arrest him again. Josh is at the scene and recharges Dave, who runs out of power, using a taser he takes from a police officer. The ball, thrown in the ocean by Number 2, is retracted. The captain orders Number 2 to be stuck in the ship's "butt" forever. The crew member who is with the police officer is allowed to enter Dave, and its rocket powered shoe with all crew leaves Earth. While in the ship, the Captain tells Number 3 that he will need a new "Number 2" and they kiss. During the end credits, the aliens dance to Shining Star by Earth, Wind and Fire.