Shaun (Simon Pegg) is an electronics shop employee with no direction in life. His younger colleagues show him no respect, he has an estranged relationship with his stepfather, Phillip (Bill Nighy), and a challenging one with his housemate, Pete (Peter Serafinowicz), because of Ed (Nick Frost), Shaun's other housemate and vulgar, unemployed best friend. Furthermore, Shaun's girlfriend, Liz (Kate Ashfield), dislikes their social life, as they primarily spend every evening at the Winchester, Shaun and Ed's favourite pub; they never do anything alone together; Shaun always brings Ed, causing Liz to always bring her flatmates, David (Dylan Moran) and Dianne (Lucy Davis).
After a bad day at work, Shaun meets an old friend, Yvonne (Jessica Hynes), who asks what he and Liz are doing for their anniversary; having forgotten to book a table at Liz's favourite restaurant, Shaun suggests the Winchester, leading Liz to break up with him. Shaun drowns his sorrows with Ed at the Winchester. They return home late and spin electro records, only to be interrupted by an enraged Pete, who is suffering a headache after being attacked and bitten by "some crackheads." Pete confronts Shaun on his flaws, telling him to sort his life out.
The next morning, an overnight zombie apocalypse has overwhelmed the town, but a hungover Shaun is too busy dealing with his problems. He and Ed discover a "drunk" woman in the back yard; however, they realise she's a zombie after she survives being impaled by a pipe. A fat zombie man also appears. Shaun and Ed flee inside, and learn from a news report the only way to kill a zombie is "by removing the head or destroying the brain". First fighting back with random objects and Shaun's records, Shaun and Ed arm themselves with a cricket bat and a shovel after breaking into their own locked shed. They kill the two zombies in the yard and, by a process of elimination, decide the safest place to wait out the crisis is the Winchester.
Shaun discovers a now zombified Pete in the shower, so he and Ed escape in Pete's car. They find Shaun's mother, Barbara (Penelope Wilton) and Phillip - who has been bitten - and switch cars after Ed deliberately crashes Pete's car in order to drive Phillip's Jaguar. They head over to Liz, Dianne, and David's flat and collect them. Before they make it to the Winchester, Phillip dies of his bite, after making peace with Shaun. Abandoning the car as Phillip zombifies, they set off on foot, bumping into Yvonne and her group of survivors. Imitating the zombies, they sneak over to the pub; however, Ed and Shaun get into an argument that alerts the zombies. David breaks the window while Shaun leads the zombies away. The five take refuge in the pub, and Shaun joins them after losing the zombies.
Hours later, Shaun discovers that the zombies had followed him; Ed fully alerts them by foolishly activating a game. Shaun discovers the Winchester rifle above the bar is functional, using it to fend off the zombies. Barbara reveals she was bitten along the way and dies, becomes a zombie, and after David antagonizes the situation, resulting in amexican standoff, the distraught Shaun is forced to shoot Barbara. David is disemboweled and dismembered by the zombies after he attempts to shoot Shaun with the empty rifle; causing a frantic Dianne to unbolt the door to rescue him, disappearing into the crowd of zombies. Ed prepares a Molotov cocktail to fend them off, but Pete arrives and bites him. He manages to get over the bar and Shaun uses the cocktail to set fire to the bar, accidentally setting off the remaining rifle ammunition. They escape into the cellar, in which they contemplate suicide, but discover a service hatch to ground level. Shaun and Liz escape through the hatch as Ed stays behind with the rifle. Back on the street, as Shaun and Liz prepare to fight the zombies, the British Army arrives and guns down the remaining zombies, rescuing them. Yvonne, who has also survived, shows up and tells Shaun and Liz to follow her. They approach the safety of the trucks, reconciled.
Six months after the outbreak, the uninfected have returned to daily life, while the leftover zombies, retaining their instincts, are used as cheap labour and entertainment. Liz has moved in with Shaun (and redecorated the place), and Shaun is keeping Ed, now a zombie, tethered in the shed while playing video games.