In a high school gym in Putnam County (yes, it is a real place!) long time hostess Rona Lisa Peretti finalises the preparations for the annual county spelling bee, reminiscing about her own spelling bee victory many years prior. The current crop of spelling contenders arrives including last year's champ Chip Tolentino; young but polically aware Logainne Schwarzandgrubenniere; Leaf Coneybear, the somewhat wide-eyed offspring of hippie parents, William Barfée, whose health conditions prevented his victory last time; newcomer to the state (but not the Bee!) Marcy Park, who speaks five (or is that six?) languages; and rounding up the team is complete newcomer Olive Ostrovsky.
It is revealed that Olive has failed to pay her $25 entrance fee, but Rona assures her that it will be worked out later. Rona introduces Vice Principal Douglas Panch, a last-minute substitute word pronouncer, and Mitch Mahoney, a menacing ex-con who is serving as "Comfort Counselor" as a part of his community service sentence.
The contest begins. As the students are individually called upon, Rona provides commentary, revealing background information about each of them. A flashback reveals that Leaf only made in into this contest because his school's winner and first runner-up were unable to attend and whilst he appears to have no hope of spelling words correctly, he snaps into abrupt trances during which he performs perfectly.
Olive reflects on a lonely childhood, where her main source of companionship (and spelling excellence) was a dictionary, and Barfée uses a bizarre "magic foot" technique to spell his words. Chip is eliminated after getting distracted by seeing Leaf's attractive sister, Marigold, in the audience and Mitch escorts him from the stage.
After a snack break (for the spellers - an interval for the audience!), Chip laments the fact that his sexual arousal cost him a victory in the spelling bee. Logainne reflects on the tremendous pressure placed on her by her dads and Leaf is eliminated when he fails to spell his next word correctly.
Marcy is exasperated at always being thought of as superior in every way and is surprised when Jesus Christ immediately appears and reveals that He doesn't care who wins this contest. Marcy, relieved, deliberately misspells her word, joyfully eliminating herself.
Olive receives a phone call from her dad and, taking advantage of the pause, Logainne seizes the microphone and makes a political statement. One of her dads attempts to sabotage Barfée by pouring a can of Coke onto the stage, hoping the stickiness will immobilize Barfée's magic foot. As play recommences, Olive is given the word "chimerical," which means "wildly fanciful and highly unrealistic." This prompts her to fantasize about her neglectful parents.
Barfée's magic foot is foiled by the spilled Coke, but he manages to spell "crepuscule" correctly anyway. Once Logainne is eliminated, Olive and Barfée volley correctly spelled words back and forth until Olive misspells a word and Barfée hesitates before claiming victory, sensitive to Olive's feelings. Olive reassures him, and he claims the victory. Panch, taking pity on Olive, invents a $25 prize for "runner up," which he produces out of his own pocket to cover Olive's entrance fee. Rona is moved by Panch's kind gesture and Olive and Barfée warmly congratulate each other.