The movie begins in medias res as Dom Cobb washes up on a beach and is brought by guards into the chamber of an elderly man. The scene then cuts to Cobb and his trusted associate, Arthur, on an "extraction" mission: wherein an individual's mind is infiltrated through dreams and information is stolen. In the dream world, pain is psychologically experienced as real, but death results in awakening. Cobb carries a spinning top called a "totem" which either spins unceasingly or topples, to determine whether he is dreaming or awake, respectively. The mission is revealed to be an audition by a powerful businessman, Saito, who hires Cobb and Arthur to perform the act of "inception"—using dreams to secretly implant an idea.
The target is Robert Fischer, son of Saito's terminally ill corporate rival, Maurice Fischer. The objective is to convince Fischer to break up his father's empire, preventing it from becoming a monopoly and threatening Saito's own company. Cobb recruits a "dream team" consisting of Eames, a forger who can change his appearance inside dreams; Yusuf, a chemist who develops the necessary sleep sedatives; and a new dream world architect, Ariadne. One night, while Cobb is sound asleep to the dream machine, Ariadne enters Cobb's dream and discovers that a shade of his deceased wife, Mal, continually haunts him, and is revealed to be sabotaging his missions as an extractor. Cobb discloses to Ariadne that he and Mal shared dreams, spending many years in a limbo dream world forging their lives. After waking, Mal remained convinced that they were still dreaming and committed suicide, attempting to force Cobb to join her by incriminating him in her death. Cobb refused and was forced to flee the U.S. and leave his children to avoid murder charges. In return for completing the mission, Saito promises to use his influence to clear the charges and reunite Cobb with his children.
Moving forward, Eames changes into Peter Browning—Fischer's godfather and an executive of his father's company—to extract information from him. They then escape from Fischer's mental defenses into a van and sleep into the second dream level—Arthur's dream—while Yusuf stays behind to protect the rest of the team. The second dream happens in a hotel building where the team tricks Fischer into believing that the kidnapping on the first dream level was real and orchestrated by Browning. Cobb convinces Fischer to enter Browning's subconscious in order to find out his motives, but in fact the team enter into Eames's dream, with Arthur staying behind to protect the team.
The third dream level is a snowy mountain fortress, which Fischer must break into to reveal the planted idea. However, Fischer is killed by the unexpected appearance of Mal, causing him to go to limbo. While Eames and a dying Saito stay behind to fend off Fischer's hostile projections, Ariadne and Cobb follow Fischer to a fourth level in an attempt to salvage the mission, save their mark, and confront Mal. The fourth level is Cobb's dystopia—a post-apocalyptic crumbling city beside a beach—and there, he and Ariadne confront Mal. Mal attempts to convince Cobb to stay in limbo by making him question reality. Cobb ultimately reveals that he originally planted the idea in Mal's mind to wake up from their dream lives—the act that proved inception was possible in the first place—but that the belief persisted even after she woke, making him indirectly responsible for her suicide. She attacks him, but Ariadne shoots her.To wake the team from each dream, timed "kicks" are organized at each level: Eames's rigging of explosives to level the mountain fortress, Arthur creating a hotel elevator to plunge down its shaft, and Yusuf driving the van over a bridge and crashing into a river. A wounded Saito dies at the snow fortress and though the kicks are imminent, Cobb remains in limbo to locate him. The film connects back to the opening scene, when Cobb speaks to the elderly man. The man is revealed to be an aged Saito—spending 50 years in limbo—and Cobb convinces him to return them both to reality. Saito reaches for a gun and Cobb suddenly awakens to find everyone on the plane, including Saito, up and well. Saito honors their arrangement and Cobb enters the United States, reunited with his children at home. Cobb spins his totem to test reality, but is then distracted by his children. The top spins without fault for a long period of time, but begins to wobble just as the screen smash cuts to black, leaving the audience to determine whether Cobb is actually in a dream or in reality.