Middle-aged, simple-minded Chance lives in the townhouse of a wealthy old man in Washington, D.C.. He has spent his whole life tending the garden and has never left the property. Other than gardening, his knowledge is derived entirely from what he sees on television. When his benefactor dies, Chance naively tells the lawyers that he has no claim against the estate and is ordered to move out.

Chance wanders aimlessly, discovering the outside world for the first time. Passing by a TV shop, he sees himself captured by a camera in the shop window. Entranced, he steps backward off the sidewalk and is struck by a chauffeured car owned by elderly business mogul Ben Rand. In the car is Rand's much younger wife Eve, who mishears "Chance, the gardener" in reply to the question who he is, as "Chauncey Gardiner."

Eve brings Chance to their home to recover. He is wearing expensive tailored clothes from the 1920s and 1930s, which his benefactor had allowed him to take from the attic, and his manners are old-fashioned and courtly. When Ben Rand meets him, he takes "Chauncey" for an upper-class, highly-educated businessman who has fallen on hard times. Rand admires him, finding him direct, wise and insightful.

Rand is also a confidant and advisor to the President of the United States, whom he introduces to "Chauncey." In a discussion about the economy, Chance takes his cue from the words "stimulate growth" and talks about the changing seasons of the garden. The President misinterprets this as optimistic political advice and quotes “Chauncey Gardiner” in a speech. Chance now rises to national prominence, attends important dinners, develops a close connection with the Soviet ambassador, and appears on a television talk show during which his detailed advice about what a serious gardener should do is misunderstood as his opinion on what would be his presidential policy.

Though he has now risen to the top of Washington society, the Secret Service and some 16 other agencies are unable to find any background information on him. During this time Rand's physician, Dr. Allenby, becomes increasingly suspicious that Chance is not a wise political expert and that the mystery of his identity may have a more mundane explanation. Dr. Allenby considers telling Rand this, but realizing how happy Chance is making him in his final days keeps him silent.

The dying Rand encourages Eve to become close to "Chauncey." She is already attracted to him and makes a sexual advance. Chance has no interest in or knowledge of sex, but mimics a kissing scene from the 1968 film The Thomas Crown Affair, which happens to be showing on the TV. When the scene ends, Chauncey stops suddenly and Eve is confused. She asks what he likes, meaning sexually; he replies "I like to watch," meaning television. She is momentarily taken aback, but decides she is willing to masturbate for his voyeuristic pleasure, thereby not noticing that he has turned back to the TV and is now imitating a yoga exercise on a different channel.

Chance is present at Rand's death and shows genuine sadness at his passing. Questioned by Dr Allenby, he admits that he "loves Eve very much" and also that he is just a gardener. When he leaves to inform Eve of Ben's death, Allenby says to himself, "I understand," but interpretation of that is left to the viewer.

While the President delivers a speech at Rand's funeral, the pallbearers hold a whispered discussion over potential replacements for the President in the next term of office and unanimously agree on Chauncey Gardiner as successor. Oblivious to all this, Chance wanders off through Rand's wintry estate. He straightens out a pine sapling flattened by a fallen branch, then walks across the surface of a lake. He pauses, dips his umbrella deep into the water under his feet (confirming for the viewer that it is not just a skim of water on the ground), then continues on, while the President is heard quoting Rand: "Life is a state of mind."