Melvin Udall is a misanthrope who works at home as a best-selling novelist in New York City. He suffers from obsessive-compulsive disorder which, paired with his misanthropy, alienates nearly everyone with whom he interacts. He eats breakfast at the same table in the same restaurant every day using disposable plastic utensils he brings with him due to his pathological mysophobia. He takes an interest in his waitress, Carol Connelly, the only server at the restaurant who can tolerate his behavior.
One day, Melvin’s neighbor, a gay artist named Simon Bishop, is assaulted and nearly killed during a robbery. Melvin is forced to care for Simon’s dog, Verdell, while Simon is hospitalized. Although he initially does not enjoy caring for the dog, Melvin becomes emotionally attached to it. He simultaneously receives more attention from Carol. When Bishop is released from the hospital, Melvin is unable to cope emotionally with returning the dog. Melvin’s life is further altered when Carol decides to work closer to her home in Brooklyn so she can care for her acutely asthmatic son.
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Unable to adjust to another waitress, Melvin arranges to pay for her son’s medical expenses if Carol agrees to continue working at her previous restaurant in Manhattan. Meanwhile, Simon’s assault and rehabilitation, coupled with Verdell’s preference for Melvin, causes Simon to lose his creative muse. Simon is approaching bankruptcy due to his medical bills. Simon’s agent, Frank Sachs, convinces Simon to go to Baltimore and ask his estranged parents for money.
Because Frank is too busy to take the injured Simon to Baltimore himself, Melvin reluctantly agrees to do so; Frank lends Melvin the use of his car for the trip. Melvin invites Carol to accompany them on the trip to lessen the awkwardness. She reluctantly accepts the invitation, and relationships among the three develop. Once in Baltimore, Carol persuades Melvin to take her out to have dinner. Melvin’s comments during the dinner greatly upset Carol, and she abruptly leaves. Upon seeing the frustrated Carol, Simon begins to sketch her and rekindles his creativity, once more feeling a desire to paint.
He briefly reconnects with his parents, but is able to tell them that he’ll be fine. After returning to New York City, Carol tells Melvin that she does not want him in her life anymore. She later regrets her statement and calls him to apologize. The relationship between Melvin and Carol remains complicated until Simon, who Melvin has allowed to move in with him until he can get a new apartment, convinces Melvin to declare his love for her. The film ends with Melvin and Carol walking together.