This is a complex story. The movie is plotted by alternating between color and black and white sequences. The story starts with the black and white sequences which proceed in chronological order. The color sequences begin the film with the ending and are put to together in reverse chronological order. The movie proceeds with this alternating of forward Black and white and reverse color until they meet in the middle of the story at the end of the film.

This is a synopsis of the story as presented when put together in chronological order. It is not the plot order presented in the film.

The story starts in black and white. Leonard Shelby wakes up in a motel room puzzled as to why he is there. The phone rings and he speaks with an unknown caller. He tells the caller that he suffers from anterograde amnesia and condition which makes him unable to create new memories and experiences are forgotten within a few minutes. He describes the condition by detailing the story of Sammy Jankis (Stephen Tobolowsky), who had the same problem (much of the desription shown in flashback).

Leonard describes how one must have a system of notes to deal with the problems and a drive to use them. Leonard has the drive that Sammy never had and the viewer sees Lenny's tattoo: "JOHN G. RAPED AND MURDERED MY WIFE" as well as other clues and notes tattooed on his body.

Leonard continues the story and explains how he has just become and an insurance investigator when he met Sammy and was assigned to determine if Jankis' condition was valid. Leonard explains how Sammy's condition was not like the other cases and that Sammy was unable to learn through conditioning. So after additional testing, Leonard says he concluded that Jankis' condition was psychological and the claim was denied since he was not covered for mental illness.

Mrs Jankis (Harriet Sansom Harris), as Leonard continues, was convinced by Leonard (in trying to placate her), that Sammy should be able to make new memories. Afterward, she tested Sammy to see if he could remember, by repeatedly asking him to give her insulin injections, and she lapsed into a coma and died from overdose. Sammy was confined to a mental institution and he got a big promotion.

During this conversation, the caller and Leonard talk about his quest and how the cops did not believe the story about the 2nd attacker. The caller provides Leonard with additional clues for his quest and Leonard tattoos the fact the killer has access to drugs. The caller identifies the killer as Jimmy Grantz and that he has set up a meeting with Jimmy. Leonard agrees to meet the caller in the motel lobby.

In the lobby, Leonard meets an "Officer Gammell" (Joe Pantoliano) who tells Leonard to call him "Teddy". Teddy gives Leonard directions to the location and Leonard goes to meet Jimmy.

When Jimmy Grantz (Larry Holden) arrives, he demands to know what Leonard is doing there and where Teddy is. Leonard threatens Jimmy with a tire iron and tells hi