Henry Hill (Ray Liotta) admits, "As far back as I can remember, I always wanted to be a gangster." As a boy, Henry idolized the Lucchese crime family gangsters in his blue-collar, predominantly Italian neighborhood in East New York, Brooklyn, and in 1955 quit school and went to work for them. The local mob capo, Paul Cicero (Paul Sorvino) (based on the actual Lucchese mobster Paul Vario) and Cicero's close associate Jimmy Conway (De Niro) (based on Jimmy Burke) help cultivate Henry's criminal career.

As adults, Henry and his associate Tommy DeVito (Joe Pesci in his Academy Award-winning performance) conspire with Conway to steal some of the billions of dollars of cargo passing through Idlewild Airport (now known as JFK International Airport). They help out in a key heist, stealing over half a million dollars from the Air France cargo terminal. The robbery helps Henry gain more of Cicero's trust. However, because Henry is half-Irish, he knows he can never become a "made man", a full member of the crime family. Nor can Jimmy Conway, who is also Irish.

Henry's friends become increasingly daring and dangerous. Conway loves hijacking trucks, and Tommy has an explosive temper and a psychotic need to prove himself through violence. At one point, he humiliates an innocent and unarmed young waiter "Spider" (played by an unknown Michael Imperioli), asking Spider to dance à la The Oklahoma Kid then shooting him in the foot. Later, when Spider stands up to Tommy, Tommy suddenly draws his gun and shoots Spider in the chest, killing him instantly.

Henry also meets and falls in love with Karen (Lorraine Bracco), a no-nonsense young Jewish woman; they go to the Copacabana club two to three times a week (the film depicts this in a famous steadicam shot). Karen feels uneasy with her boyfriend's career, but is also "turned on" by it. Henry and Karen eventually marry.

In June 1970, Tommy (aided by Jimmy Conway) brutally murders Billy Batts (Frank Vincent), a made man in the competing Gambino crime family; a major offense that could get them all killed by the Gambinos if discovered. Henry, Conway and DeVito bury Batts' corpse in an abandoned field (a flash-forward of this scene opens the film). When they discover six months later that the land has been sold, they are forced to exhume, move, and rebury the badly decomposed body.

Henry's marriage deteriorates when Karen finds he has a mistress, Janice Rossi (played by the late Gina Mastrogiacomo). Karen confronts a sleeping Henry with a gun as he wakes up. As soon as she lowers the gun, Henry subdues her and screams that he has enough on his mind having to worry about being whacked on the street without waking up with a gun in the face.

After dangling a debt-ridden Florida gambler over a lion cage at the Lowry Park Zoo in Tampa, Henry and Jimmy are caught and sent to prison for four years. There, Henry deals drugs to keep afloat and to support his family, and, when he returns to them, he has a lucrati