Hook-handed Vietnam veteran Staff Sergeant John “Four Leaf” Tayback’s (Nick Nolte) memoir, Tropic Thunder, is being made into a film. With the exception of newcomer, supporting actor Kevin Sandusky (Jay Baruchel), the cast—fading action hero Tugg Speedman (Ben Stiller), five-time Academy Award-winning Australian method actor Kirk Lazarus (Robert Downey Jr.), closeted gay rapper Alpa Chino (Brandon T. Jackson), and drug-addicted comedian Jeff Portnoy (Jack Black) all behave unreasonably. Rookie director Damien Cockburn (Steve Coogan) cannot control them during filming of a large battle scene, and production is reported to be one month behind schedule a mere week into production. Furious studio executive Les Grossman (Tom Cruise) orders Cockburn to resume filming as planned, or have the project shut down.
Acting on Four Leaf’s advice, Damien drops the actors into the middle of the jungle, with hidden cameras and rigged special effects explosions to film “guerrilla-style”. The actors have guns that fire blanks, along with a map and scene listing that will lead to a helicopter waiting at the end of the route. Unknown to the actors and production, the group have been dropped in the middle of the Golden Triangle, the home of the heroin-producing Flaming Dragon gang. Just as the group are about to set off, Damien inadvertently steps on an old land mine and is blown up, stunning the actors. Tugg, believing Damien faked his death to encourage the cast to give better performances, persuades the others that Damien is alive, and that they are still shooting the film. Lazarus is unconvinced but joins them in their trek through the jungle.
When Four Leaf and pyrotechnics operator Cody Underwood (Danny McBride) try to locate the dead director, they are captured by Flaming Dragon. Four Leaf is revealed to have hands; he confesses to Underwood that he actually served in the Coast Guard, has never left the United States, and that he wrote his “memoir” as a tribute. As the actors continue through the jungle, Kirk and Kevin discover that Tugg is leading them in the wrong direction. The four actors, tired of walking and hoping to be rescued, leave Tugg, who goes off by himself and is captured by Flaming Dragon. Taken to their heroin factory, Tugg believes it is a POW camp from the script. The gang discovers he is the star of their favorite film, the box office bomb Simple Jack, and forces him to reenact it several times a day.