In the autumn of 1963, Randle McMurphy is on an Oregon work farm for the statutory rape of a 15-year-old girl. He pretends to be mentally insane to get himself transferred to a mental institution and avoid hard labor. The ward is dominated by head nurse Mildred Ratched, a cold, passive-aggressive tyrant who intimidates her patients.

The other patients include young, anxious, stuttering Billy Bibbit; Charlie Cheswick, who is prone to temper tantrums; delusional, child-like Martini; the articulate, repressed homosexual Dale Harding; belligerent and profane Max Taber; epileptics Jim Sefelt and Bruce Fredrickson; quiet but violent-minded Scanlon; tall, deaf-mute Native American "Chief" Bromden; and several others with chronic conditions.

Ratched sees McMurphy's lively, rebellious presence as a threat to her authority, which she responds to by confiscating and rationing the patients' cigarettes and suspending their card-playing privileges. McMurphy finds himself in a battle of wills against Ratched. He steals a school bus, escaping with several patients to go fishing on the Pacific Coast and encouraging them to discover their abilities and find self-confidence.

After an orderly tells him that the judge's sentence does not apply to people who are deemed to be criminally insane, McMurphy makes plans to escape, encouraging Chief Bromden to throw a hydrotherapy console through a window. It is also revealed that McMurphy, Chief, and Taber are the only non-chronic patients involuntarily committed to the institution; the rest of them are self-committed and could leave at any time, but are too afraid to do so. After Cheswick bursts into a fit and demands his cigarettes, which had been rationed by Ratched, McMurphy fights with the orderlies, and Chief intervenes.

Ratched sends Chief, Cheswick, and McMurphy to the "shock shop" as a result of this insubordination. While awaiting their punishment, McMurphy offers Chief a stick of gum, and discovers he can speak and hear, having feigned his deaf-muteness to avoid engaging with anyone. After being subjected to electroconvulsive therapy, McMurphy returns to the ward pretending to be brain-damaged but then reveals that the treatment has made him even more determined to defeat Ratched. McMurphy and Chief make plans to escape, but decide to throw a secret Christmas party for their friends after Ratched and the orderlies leave for the night.

McMurphy sneaks two prostitutes, Candy and Rose, and bottles of alcohol into the ward; he bribes guard Turkle to allow this. After the party, McMurphy and Chief prepare to escape, inviting Billy to come with them. Billy refuses, but asks for a "date" with Candy; McMurphy arranges for him to have sex with her. McMurphy and the others get drunk, and McMurphy falls asleep instead of making his escape with Chief.

Ratched arrives in the morning to find the ward in disarray and most of the patients passed out. She discovers Billy and Candy together and aims to embarrass Billy in front of everyone. Billy manages to overcome his stutter and stands up to Ratched. When she threatens to tell his mother, Billy cracks under the pressure and reverts to stuttering. Ratched has him placed in the doctor's office. Moments later, McMurphy punches an orderly when trying to escape out of a window with the Chief, causing the other orderlies to intervene. Meanwhile, Billy commits suicide by slitting his throat with broken glass.