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The story opens in 1984 with ten-year-old Tré Styles (Desi Arnez Hines II) and three other youths heading to school, on the way stopping to inspect a crime scene they encounter. At school, Tré misbehaves in front of his teacher and receives a three-day suspension after fighting with another classmate. While discussing the issues with his teacher, Tré's mother, Reva (Angela Bassett), elicits surprise from the teacher when she references her education as well as Tré's father, who the teacher had not realized existed. Frustrated with her inability to curtail Tré's history of disobedience, Reva sends him to live in the Crenshaw neighborhood of South Central Los Angeles with his hard-nosed father, Furious Styles (Laurence Fishburne), from whom she hopes Tré will learn life lessons.
Upon Tré's arrival, his father instructs him to rake the entire front lawn and assigns other household responsibilities, which include cleaning and maintaining their home. Furious explains that, although these tasks may seem unfair and harsh, learning responsibility will make Tré a man and keep him from ending up dead or in jail. Later, during his first night living with his father, Tré hears his father firing at a burglar. The police arrive more than an hour later and decide the crime is unimportant because nothing was taken and the burglar escaped unharmed.
The following day, Tré reunites with childhood friends Ricky (Donovan McCrary) and Darrin "Doughboy" Baker (Baha Jackson), and Chris (Kenneth A. Brown), a quiet and shy boy also living in the neighborhood. Ricky and Doughboy, maternal half-brothers, live with their mother in a small house across the street. While Ricky is naïve and trusting, Doughboy is aggressive and street-smart. Later that day, while walking along train tracks to the site of a dead body, the three are harassed by a teenage gang, who steal Ricky's football. Doughboy picks a fight and is kicked in the stomach. The ball is later returned to Ricky by another older boy.
Furious, who appears to be the only father present in the neighborhood, takes Tré on a fishing trip, where he warns him about unprotected sex and discusses the responsibility of fatherhood. The pair then return to Crenshaw, where they find Doughboy and Chris being led by police officers into a squad car after having been caught stealing.
Seven years later, a "welcome home" party happens in the Baker home. Doughboy (Ice Cube), who had previously dropped out of high school, has just been released from prison, and sits at a table playing dominoes with his friends, Chris (Redge Green), (now in a wheelchair, presumably as the result of a gunshot wound), "Dookie", and "Monster". Ricky (Morris Chestnut), now a star running-back for Crenshaw High School, lives at home with his mother Brenda (Tyra Ferrell), girlfriend Shanice (Alysia Rogers), and his newborn son. Tré (Cuba Gooding Jr.) holds a steady job working at a store in the Fox Hills Mall, and has stayed away from gangs while excelling at school. He hopes to attend college as does his girlfriend Brandi (Nia Long), whose sexual abstinence is part of her Catholic faith.
A college football coach from USC visits Ricky one night for an interview and promises Ricky an athletic scholarship at USC if he earns a minimum SAT score of 700. Ricky struggles during the test, looking often at Tré for help, and seems unsure of passing. Later that day, Furious tells the boys that the English section of the test is culturally biased and only the math is fair.
Furious later takes the boys to Compton (then, in 1991, a dangerous and rough neighborhood), discussing gentrification with them and a group of citizens, explaining how violence and drug use divide the black community by decreasing property values, allowing real estate companies to buy the land cheaply from black residents and sell it at a profit to developers. The influx of white investment money raises property values and taxes, pushing out the remaining old residents in the process. Furious tells the crowd that the rest of the nation will not help the urban poor because they are not personally affected by the violence, and that blacks must end the cycle of violence plaguing the neighborhoods themselves.
Later that night during a local street racing gathering, Ricky is provoked by a Blood gang member named Ferris (Raymond D. Turner). In defense of his brother, Doughboy (an opposing Crips gang member), brandishes a pistol, and the whole scene degenerates into gunfire (though no one is hurt). While speeding away from the scene, Tré and Ricky are pulled over by the LAPD. The lead officer is the same officer who responded to Furious' 911 burglary call in 1984. He is a stereotypical "self-hating" African-American cop who - enjoying fully the power his badge allows him - shoves a gun in Tré's face and asks him what he will do about it. On the verge of tears, Tré arrives late to Brandi's house and suffers a breakdown; later that night they have sex for the first time.
The next day, Ricky, annoyed when Shanice tells him to go get a box of cornmeal, provokes a fight with Doughboy. Brenda rushes to Ricky's aid while berating Doughboy, further indicating that she values Ricky and his impending scholarship more than she does Doughboy. Ricky and Tré later head to the grocery store, but on the way back run across Ferris and his friends. They take numerous shortcuts to escape temporarily. However, Ricky is gunned down as the pair walk home. Doughboy and his friends recover Ricky's body, with Brenda blaming Doughboy, who tries to comfort her but is rebuffed; he then attempts to remove Ricky's son from the room where his father lies dead. Later that night, Brenda sobs over Ricky's test results, discovering he earned a 710, just enough to qualify for the scholarship.
Doughboy, Dookie, Monster and Tré vow revenge on the enemy gang. Furious finds Tré holding his .357 Magnum pistol and convinces Tré to abandon his plans. Tré later sneaks out of his bedroom window to join Doughboy and the gang as they search for Ferris. Later that night, as the gang drives around the city, Tré realizes he is making a mistake and asks to be let out of the car. Doughboy pulls over and lets Tré out at a bus stop. Later, the gang finds Ferris and his friends outside a fast food restaurant, and gun them down with an AK-47 in a drive-by shooting, killing one and wounding the others. Doughboy hops out the lowrider and personally executes Ferris and the other Bloods with his .45, avenging his brother's death.
The next morning, Doughboy visits Tré, now understanding Tré's reasons for abandoning the gang. Doughboy - having killed three men - knows that he will soon face retaliation for Ferris' death, and accepts the consequences of his crime-ridden life. He plaintively questions why America "don't know, don't show, or don't care about what's going on in the Hood." He sorrowfully says that he has no brothers left now after Ricky's death, but is embraced by Tré, who says Doughboy still has "one brother left", referring to himself. The final scene plays, showing Doughboy crossing the road pouring out the remaining malt liquor from his bottle as a sign of respect for his dead brother, and then disappears on screen. His murder at the hands of the rival gang two weeks later is described in the epilogue. The epilogue goes on to state that both Tré and Brandi respectively go on to college at Morehouse and Spelman in Atlanta.