In Hollywood at Mammoth Studios, executive producer R.B. Harris complains to publicist Al Devers that the studio is not receiving enough attention in the press and that the New York office is pressuring him to come up with a hit film.

Soon after, Al finds a newspaper report about Joe Ruddy of Emoryville, Kansas, who has been nominated "Public Picture Fan #1" because he has seen hundreds of films and is also able to estimate attendance figures at his local theaters.  Harris invites Joe to Hollywood to advise the studio on which films to produce and assigns his cousin, would-be actress Vera Valaine, to vamp Joe.

At a press conference to welcome him, Joe is asked who he regards as a Hollywood glamor girl, and he names Vera the "Wow" girl and obliges Harris to cast her as the lead in a new gangster movie, King of Crime.  However, Rod La Tour, the male lead, refuses to work with Vera and walks off the set.

After Joe suggests to Harris that he hire a real gangster, Bugsie Malone, to play the lead, Harris sends him to Chicago to contact Malone.  Joe goes to the nightclub where Bugsie's sister Molly entertains and talks her into helping him persuade Bugsie to do the picture.  When Bugsie arrives, accompanied by sidekicks "The Professor" and Trigger, he reveals that Molly has been holding a million dollars for him but refuses to hand it over unless he reforms.  Joe eventually makes his pitch and Bugsie's vanity about starring in his own life story causes him to accept.

Joe, Bugsie, Molly and the others head for Hollywood, where Bugsie installs himself in Harris' mansion.  At the studio, Bugsie takes over and refuses to accept the script because in it the police win, and declares that he wants Molly to play his sister.  The film starts production and Bugsie, bored with the slow pace, rewrites scene after scene.

On the eighth day of shooting, when Molly is to perform a death-bed scene, Vera shows up expecting to play the scene and is furious to discover that she has been replaced.  Immediately after Molly "dies," Amatoff, the film's director, is stunned by the entrance of a ten-girl dance routine which Bugsie has inserted in the script.  Molly then "revives" and launches into a comedy dance routine.

Later, Joe discovers that Molly is in love with him and tries to stall when Bugsie insists that they get married.  Further complications arise when Harris' boss Johnson flies in from New York to find out why the picture is delayed and overbudget.

Meanwhile, at a dude ranch in Palm Springs, Bugsie and his pals are relaxing until Johnson and Harris show up.  Bugsie threatens Johnson and chases him off, whereupon Johnson removes his backing for the production.  Harris wants to continue, however, and Joe arranges for a bank robbery sequence to be photographed at a real bank, as Harris cannot afford to build a set.  When The Professor and Trigger are cast as Bugsie's henchmen and decide to rob the bank for real, Joe overhears their plan, but they catch him and tie him up.  Unknown to Bugsie, they escape with $50,000.

Molly, meanwhile, has been hit by a mike boom and is in a coma.  Bugsie offers Harris the million dollars Molly is holding to pay back the bank and finish the picture.  However, Molly now has amnesia and has reverted to childhood, but they try to get her to tell where she has hidden the cash.  When Molly receives another bump on the head, she recovers her memory and hands over the money.

Later, after The Professor and Trigger have been caught and the production is completed, Bugsie and Molly leave for the East by train.  As the train pulls out, Bugsie pulls Joe on board and surprises him with a minister and witnesses, and he and Molly are married.