Scientist Richard Parker (Campbell Scott) is playing a game of hide-and-seek with his young son Peter, but during the game he discovers that his study has been broken into. After quickly gathering together some hidden documents, Richard and his wife Mary (Embeth Davidtz) leave Peter with his Aunt May (Sally Field) and Uncle Ben (Martin Sheen), then mysteriously depart without telling Peter where they are going.
Years later, the teenage Peter Parker (Andrew Garfield) has become an alienated social outcast who does not have many friends. He attends Midtown Science High School, where he spends much of his time pining over his crush Gwen Stacy (Emma Stone), while frequently getting bullied by the obnoxious Flash Thompson (Chris Zylka).
At home, Peter finds a brief case containing some of his father's old documents, and learns that his father worked with fellow scientist Dr. Curtis Connors (Rhys Ifans) at a pharmaceutical company named Oscorp. Faking his way into the Oscorp building by pretending to be an intern, Peter sneaks into a laboratory where extremely strong "biocable" is being created from genetically-modified spiders. One of the spiders escapes from its container and bites Peter. On the subway ride home, Peter scuffles with a gang of thugs and discovers that he suddenly has increased agility and strength. Upon returning home, he finds the spider hiding in his jacket, and stores it away.
The next day, Peter goes to Dr. Connors' house and gives him Richard Parker's documents. Dr. Connors explains that he and Richard were researching cross-species genetics in order to find a way to re-grow lost limbs, with Dr. Connors being motivated by the loss of his own right arm. Dr. Connors is frustrated because his superior, Dr. Rajit Ratha (Irrfan Khan), is pressuring him into devising a cure for Oscorp's CEO Norman Osborn, who is terminally ill.
Back at school, Peter gets in trouble after accidentally breaking a basketball hoop during a game with Flash. Uncle Ben is forced to switch a work shift to meet with the principal about the situation. afterwards, Uncle Ben asks Peter to pick up Aunt May, but Peter instead practices his new-found powers and meets with Dr. Connors at Oscorp, who shows him the limb-regeneration formula work on a laboratory mouse.
When Peter returns home, Uncle Ben scolds him for having forgotten to pick up Aunt May, reminding him that Richard believed that people should always make their responsibility their priority. A distraught Peter storms off. He goes to a general store to buy milk, but falls two cents cents short and is refused service by the store clerk. Suddenly, a man robs the store and Peter doesn't do anything to stop him. Uncle Ben, who was searching for Peter, sees the thief running away and wrestles with him over a gun. The thief shoots Uncle Ben right in front of Peter and runs off.
Shortly after the attack, Peter acquires a police sketch of the killer, and uses his abilities to hunt criminals matching the killer's description. After attacking a man who fit the description, he is chased by a gang and falls inside an abandoned gym, and a luchador wrestling poster inspires him to create a mask.
Later on, he adds a spandex suit for mobility and suddenly becomes a folk hero who the public refers to as 'Spider-Man'. The police, led by Gwen's father Cpt. George Stacy (Dennis Leary), soon start a man-hunt for the masked vigilante.
Meanwhile, Dr. Ratha fires Dr. Connors for refusing to immediately start human trials of the limb-regeneration formula. He takes a sample of the drug and plans to test it at a Veterans Administration hospital under the guise of flu shots. Growing desperate, Dr. Connors injects himself with the formula, and passes out. Upon awakening, he finds his lost arm has fully regenerated. However, he then mutates into a large, reptilian monster and chases after Dr. Ratha at Williamsburg Bridge, throwing cars over the side as he rampages. Spider-Man saves each fallen car with the biocable web, which he deploys from wrist-mounted shooters of his own invention. With a great deal of difficulty, he also manages to save the life of a young boy trapped in a car that has fallen from the bridge and that Spider-Man is holding suspended in mid-air through the biocable webbing. Spider-Man then confronts The Lizard in the sewers, barely escaping alive.
Unfortunately, Peter leaves behind a camera he used to expose The Lizard's intentions; a camera inscribed with his name. The Lizard finds it and learns Spider-Man's real identity. He attacks Peter at school and plans to unleash the drug all over Manhattan to mutate all humans into lizards using a cloud-generating device at Oscorp Tower, unaware that Gwen is there making an antidote for the condition at Peter's request. The police mobilizes to stop both him and Spider-Man, but are delayed when the Lizard infects officers with small dosages of the chemical.
In the manhunt, Captain Stacy learns Spider-Man's real identity and allows him to go stop Connors while proceeding to the tower himself after Peter mentions that Gwen is there making the antidote. However, during the manhunt itself, Spider-Man was wounded by a police bullet and is having difficulty swinging from building to building to reach Oscorp Tower. The father of the young boy whose life Spider-Man saved, works in construction, and hears about what's going on through the radio and TV while working an evening shift. He calls all of his construction worker friends who are also working, and they all maneuver large cranes into proper formation so that Spider-Man can use them to reach Oscorp Tower.
After Captain Stacy retrieves the antidote from Gwen and arrives to save Spider-Man who was being overpowered, both of them fight together to delay the Lizard while Spider-Man modifies the machine to disperse the antidote instead, restoring the humanity of Connors and the infected officers, and allowing him to save Peter from a fatal fall from the tower.
Unfortunately, The Lizard has mortally wounded Captain Stacy beforehand, and Stacy makes Peter promise to keep Gwen safe by staying away from her, before he dies from his wounds. Peter initially does so, staying out of sight at Captain Stacy's funeral, which offends Gwen. She confronts him at his house, and he doesn't talk about it, but Gwen is no fool; she realizes his reasons. Arriving late to class back in school, Peter is told by a teacher to "not make promises he can't keep." Peter leans forward and whispers to Gwen, "but those are the best kind." She smiles, and it is implied that the two resume their relationship. With his first challenge surmounted, Peter officially takes to the streets as a proper hero.
In a post-credits scene, Dr. Connors is sitting in a prison cell speaking with a mysterious man (presumably Norman Osborn), The man inquires about Dr. Connors divulging information about Peter's father, but Dr. Connors tells the man to leave Peter alone, and the scene abruptly ends with a flash of lightning.