The series centers on the Taylor family, which consists of Tim (Tim Allen), his wife Jill (Patricia Richardson) and their three sons: Brad (Zachery Ty Bryan), Randy (Jonathan Taylor Thomas), and Mark (Taran Noah Smith). The Taylors live in suburban Detroit, and they have a neighbor named Wilson (Earl Hindman) who is often the go-to guy for solving the Taylors' problems.

Tim loves power tools, cars, and sports. An avid fan of the Detroit professional sports teams, Tim wears Lions, Pistons, Red Wings, and Tigers clothing in numerous instances, and many plots revolve around the teams. He is a former salesman for the fictional Binford Tool company, and he is very much a cocky, overambitious, accident-prone know-it-all. Witty but flippant, Tim jokes around a lot, even at inappropriate times, much to the dismay of his wife. However, Tim can sometimes be serious when necessary. Jill, Tim's wife, is loving and sophisticated, but she is not exempt from dumb moves herself. In later seasons, she returns to college to study psychology. Family life is boisterous for the Taylors, with the two oldest children, Brad and Randy, tormenting the much younger Mark, all while continually testing and pestering each other. Such play happened especially throughout the first three seasons, and it was revisited only occasionally until Jonathan Taylor Thomas left at the beginning of the eighth season. During the show's final season, Brad and Mark became much closer due to Randy's absence.

Brad, popular and athletic, was often the moving factor, who engaged before thinking, a tendency which regularly landed him in trouble. Randy, a year younger, was the comedian of the pack, known for his quick thinking, wisecracks, and smart mouth. He had more common sense than Brad but was not immune to trouble. Mark was somewhat of a mama's boy, though later in the series (in the seventh season) he grew into a teenage outcast who dressed in black clothing. Meanwhile, Brad became interested in cars like his father and took up soccer. Randy joined the school drama club and later the school newspaper; in the eighth season, he left for Costa Rica.

In early seasons, Wilson was always seen standing on the other side of Tim's backyard fence as the two engaged in conversation, usually with Wilson offering sage advice as Tim grappled with his problems. In later seasons, a running joke developed in which more and more creative means were used to prevent Wilson's face below the eyes from ever being seen by the audience. Also, in later seasons, Wilson's full name was revealed to be Wilson W. Wilson, Jr.