In the back of a small car, in a small aquarium, resides a small, unnamed chameleon (Johnny Depp). The only living creature in his 'environment,' Rango has fancied himself as an actor, with several inanimate object as his friends and fellow thespians. In his self-contained world, Rango's 'friends' tell him that even though he fancies himself a hero, he needs a challenge.
The world goes awry when something in the road causes the car to jolt, and the chameleon and his aquarium fly out the back of the vehicle he's in, shattering to the ground. Getting up, the chameleon sees an armadillo in the road, it's mid-section squashed in by a tire. The creature asks for help to get to the other side, and the chameleon assists. Not being used to the heat, the chameleon asks the armadillo where he can find water. The creature tells him he can find it in dirt, a day's journey away.
tThe chameleon follows his shadow through the desert, but is almost eaten by a hawk. Taking refuge in a storm drain, the chameleon wakes the next morning to a small rush of water that quickly evaporates in the sun. Close by, he comes across a female lizard named Beans (Isla Fisher). Though at first hostile, Beans gives the chameleon a ride into town. The chameleon attempts to blend in with the locals, and makes his way to a nearby saloon. Going in, he arouses the suspicion of almost everyone in the bar. Several ask to know who he is, and after seeing the word 'Durango' on a bottle of cactus juice, the chamelon claims that his name...is Rango.
Rango then attempts to spin a story that makes him seem like a hero. When someone asks if he killed some outlaws known as The Jenkins Brothers, Rango claims to have done it with just one bullet. As he talks, a couple of outlaws enter the room, led by a lizard named Bad Bill (Ray Winstone). Rango attempts to act intimidating, but instead rouses Bill's ire, leading to the two having a showdown in the middle of the town.
Rango thinks he's scared off Bad Bill and his boys when they run away...only to realize the hawk he outwitted before is right behind him. Rango then goes running through the town, with the final events looking as if Rango was chasing the hawk, before finally killing him by dropping the town's water tower on it. While some rejoice at the death of the hawk, several make mention that with the hawk's death, a desperado by the name of Rattlesnake Jake (Bill Nighy) could very well return to town. However, Rango casually explains that he isn't afraid, and that he and Jake are brothers.
Rango is then brought before the town's Mayor (Ned Beatty), an old turtle who claims that Rango has given the townspeople hope. Rango is then made the town Sheriff.
Shortly thereafter, Rango watches perplexed as the townsfolk take part in a strange ritual in which they leave Dirt and head towards a spigot in the desert. The townspeople seek 'salvation' from the spigot, but no water materializes. The townsfolk have been hard-up for water for some time, and after the Mayor admits sacrifices will need to be made, Beans steps forward, accusing the Mayor of somehow being behind their water shortage.
It soon becomes clear that the town's bank is also short on water, and the reserves in the vault only has enough water for 5 more days. Rango attempts to quell the townsfolk's further worries, by promising to uphold the law. However, he accidentally mistakes some moles looking to rob the local bank for prospectors, and allows them to continue on, even giving them equipment.
The next day, word of the bank robbery spreads. Rango leads a search party through the underground tunnels that criss-cross below the desert. The group then finds a large pipe and follow it out into the desert, where they find the Bank Manager Mr Merrimack, dead.
Some distance off, they find the moles with a covered wagon with what appears to be the water jug that once sat in the bank. The group manages to take off with the covered wagon, but not before the moles and the rest of their underground brethren give chase. However, during the chase, the covered tarp on the jug comes undone, and the bottle is found to be empty.
One of the moles that brought the jug to his father claims it was empty when he found it, but the townspeople assume the moles made off with their water. The three moles are returned to town for a trial, but the now apparent lack of water has the rest of the town worried.
Meanwhile, Rango has come to suspect the Mayor even more. When the Mayor gets wind of Rango's suspicions regarding him, he sends his men to find Rattlesnake Jake. Jake has been told the stories that Rango has mentioned, and gets Rango to confess that everything he has said is a lie, including the death of the Jenkins Brothers (which were actually killed by Jake).
Rango then walks out of Dirt, disgraced. He eventually makes his way back to the 2-lane highway. He attempts to cross it like the armadillo from before, and manages to make it across before collapsing. Unconscious, he is carried over the sandy terrain where he encounters 'The Spirit of the West.' The Spirit gives Rango some more courage, but is then helped along by the Armadillo (his mid-section now restored), and some moving cacti. The reach the top of a crest, and down below, see a large city (Las Vegas). Nearby is an emergency valve that appears to have been cut off. It soon makes sense what the Mayor is planning: he intends to make the town of Dirt into the large city below. Rango had also heard that the Mayor had been buying up lots of land, but that Beans was one of the last hold-outs.
Rango then returns to Dirt with a plan. He confronts the Mayor and Rattlesnake Jake, who are attempting to coerce Beans into signing over the title to her property. Rango challenges Jake to a duel, and at High Noon, the armadillo and the cacti open the emergency valve, and water floods throughout the town. However, in the wake of Beans possibly being killed, Rango surrenders, and the two are placed in the bank's vault, where the Mayor attempts to drown them. While this is going on, the Mayor's men then turn their guns on Rattlesnake Jake, with the Mayor confidently speaking of how his type will soon be a distant memory.
Rango ends up inadvertently turning the tables when one bullet he has manages to break the vault's glass, and the water in the vault washes everyone out into the streets. Jake acknowledges what Rango did, before turning on the Mayor, dragging him out into the desert as the turtle pleads for his life.
The citizens then celebrate their newfound fortune as the water rains down around them.