Ignatius J. Reilly dresses eccentrically, holds a master's degree, has no job, is 30 years old, and lives with his widowed mother, Irene, in a dark, old house in New Orleans. He has left town only once in his life to apply for a teaching position in Baton Rouge, and that trip has become the defining event of his life, traumatizing him against travel and work. Ignatius is overweight, overeducated, and overindulged by his mother Irene. He watches television and movies and jots notes in notebooks, vaguely figuring someday to organize and publish them as a grand critique of the last four centuries of Western civilization, which he sees as steadily declining. He has rejected the Catholicism of his childhood, feeling himself superior to its lax, modern-day standards. Any amount of stress makes Ignatius' pyloric valve snap shut, causing him debilitating gas pains.

The green hat Ignatius wears everywhere, attracts the attention of police officer Angelo Mancuso, but Ignatius escapes arrest when old Claude Robichaux steps in, ranting against communist conspiracies. Ignatius and his mother seek refuge in a nearby bar, dark and unfriendly. Irene befriends a young gay man, Dorian Greene, whom Ignatius dismisses as a degenerate. Lana Lee, the owner of Night of Joy, is a Nazi in Ignatius' eyes. Lana hires a young black man, Jones, to sweep the bar for sub-minimum wages by threatening to turn him into the police for vagrancy. In return, Jones looks for an opportunity to bring Lana's business down.

On the way home from the bar, Irene crashes her car into a building, causing considerable damage. The hapless Mancuso, now assigned to undercover work as a first step toward being thrown off the force, feels sorry for Irene and arranges time payments of her debt. Ignatius resents Mancuso's incursion into the household. Irene will somehow make do on her own. Irene, however, sees no alternative to Ignatius' going to work to help pay off the debt.

Ignatius' first job is as a file clerk in the floundering Levy Pants Company, where he sets his mind to improving operations and drawing Gus Levy back into the day-to-day business. Gus, regularly besieged by his harpy wife, prefers to leave details to his hapless office manager, Gonzalez, poorly assisted by the senile Miss Trixie. Trixie wants only to retire, but Mrs. Levy, an amateur psychologist, demands she be kept on and made to feel wanted. With the best of intentions, Ignatius forges an insulting letter to a Levy Pants distributor, which precipitates a $500,000 libel suit against Gus and organizes the factory workers, mostly black, in a demonstration for better conditions. For the latter, Ignatius is fired.

Ignatius' nose leads him accidentally into his second job, as a hot dog vendor for Paradise Products, Inc. Irene despises hot dog vendors and Ignatius' meager take-home pay, the result of a ravenous appetite combined with indifference to sales, increases tension in the Reilly home. Ignatius is dressed as a pirate, assigned to the French Quarter, and ordered to sell or be fired. There he forms a political alliance with Dorian Greene and unwittingly rents space in his cart for the soft pornography Lana and George peddle to schools.

Ignatius resents his mother's joining Mancuso and Mancuso's aunt, Santa Battaglia, in nightly bowling outings. Santa plays matchmaker for Irene and the rich widower Claude, and they pressure her to seek professional help for Ignatius. When Ignatius dons his pirate regalia and addresses a political rally for his secretive, new "Sodomite Party," Irene, Santa, Mancuso, and Claude unite to intervene. Ignatius takes politics too seriously for his wildly partying audience and is ejected. He goes to the Night of Joy bar and is used by Jones as the keystone in sabotaging Lana's business, suggesting the stripper Darlene is the Boethius-loving model in a risquy postcard. Ignatius ends up lying whale-like in the gutter and Mancuso breaks a citywide pornography ring. Newspaper coverage gets Ignatius fired from Paradise Products and helps Gus Levy figure out who forged the letter. Ignatius puts the blame on senile Trixie, which is convenient for everyone.

Irene resolves to commit Ignatius to the Charity Hospital and bids a tearful, too-tender farewell, which makes Ignatius suspicious and then panicky. His radical ex-girlfriend, Myrna Minkoff, rescues Ignatius, after driving to New Orleans non-stop from New York, however. They flee just before the ambulance arrives, and as they reach the highway, Ignatius' valve unlocks and his headache vanishes. Myrna's advice has been right all along.