Alien botanists secretly visit Earth at night to gather specimens in a California forest. One of them separates from the group, fascinated by the distant city lights, but U.S. government vehicles arrive and chase the startled creature. The other aliens depart, abandoning him on Earth. In a nearby neighborhood in the San Fernando Valley, ten-year-old Elliott Taylor's suspicions are roused when he pitches a baseball into a tool shed, and the ball is thrown back. Later that night, Elliott returns with a flashlight, discovering the creature among the cornstalks. He shrieks and flees the scene.

Despite his family's disbelief, Elliott leaves a trail of candy to lure the alien into his house. Before bed, he realizes the alien is imitating his movements. The next morning, Elliott feigns sickness to stay home from school and play with him. He can "feel" the alien's thoughts and emotions, shown when the alien accidentally opens an umbrella, startling him and simultaneously Elliott several rooms away.

Later that day, Elliott introduces his older brother Michael and seven-year-old sister Gertie to the alien, deciding to keep him hidden from their mother, Mary. When the children ask the alien about his origins, he shows them by levitating several balls, representing his planetary system, and demonstrates his powers by reviving dead chrysanthemums. He demonstrates his healing power, through his glowing fingertip, on a minor cut on Elliott's finger.

At school the next day, Elliott begins to experience a much stronger empathic connection with the alien, including exhibiting signs of intoxication (because the alien is at Elliott's home, drinking beer and watching television) and freeing the frogs in his biology class. As the alien watches John Wayne kiss Maureen O'Hara in The Quiet Man on television, Elliott kisses a girl he likes similarly and is sent to the principal's office.

The alien dubs himself "E.T.", reading a comic strip where Buck Rogers, stranded, calls for help by building a makeshift communication device, and is inspired to try it himself. E.T. gets Elliott's help to build a device to "phone home" by using a Speak & Spell. Michael notices that E.T.'s health is declining and that Elliott is referring to himself as "we". Throughout this, the boys are unaware that E.T. is being tracked by government agents and that all three of them are being spied on.

On Halloween night, Michael and Elliott dress E.T. as a ghost to sneak him out. Elliott and E.T. head through the forest, where they successfully call home. The next day, Elliott wakes up in the field, finding E.T. gone. Elliott returns home to his worried family. Michael discovers E.T. dying next to a culvert and takes him home to an also-dying Elliott. Mary becomes horrified upon discovering her son's illness and the dying alien, just as a group of government agents dressed in biohazard suits led by "Keys" invades the house.

Scientists set up a lab at the house, asking Michael, Mary, and Gertie what they know about E.T. While the scientists are treating Elliott and E.T., the mental connection between Elliott and E.T. disappears. E.T. appears to die while Elliott recovers. Elliott is carried away, screaming that the doctors are killing E.T. as they try to revive him. When the doctors pronounce E.T. dead, Michael discovers that the chrysanthemums that E.T. previously revived are dying again.