In New York City, the self-absorbed and dim-witted but good-natured Derek Zoolander (
Ben Stiller) is ousted as the top male fashion model by the rising star Hansel (
Owen Wilson), and his reputation is further tarnished by a critical article from journalist Matilda Jeffries (
Christine Taylor). After his three roommates and colleagues are killed in a "freak gasoline-fight accident", Derek announces his retirement from modeling. He goes to his native New Jersey to attempt to reconnect with his working class father Larry (
Jon Voight) and brothers Luke (
Vince Vaughn) and Scrappy (
Judah Friedlander) by helping them in the coal mines. Derek's delicate methods make him an impractical miner, and his family rejects him.
Meanwhile, fashion mogul Jacobim Mugatu (
Will Ferrell) and Derek's agent Maury Ballstein (
Jerry Stiller) are charged by the fashion industry with finding a model who can be
brainwashed into assassinating the new progressive-leaning
Prime Minister of Malaysia, allowing them to retain cheap
child labor in the country. Though Mugatu has previously refused to work with Derek for any show, Derek returns to New York City and accepts Mugatu's offer to star in the next
Mugatu takes Derek to his headquarters, masked as a day spa, where Derek is
conditioned to attempt the assassination when the song "
Frankie Goes to Hollywood is played. Matilda, feeling partially responsible for Derek's retirement, becomes suspicious of Mugatu's offer and, tipped off by an anonymous caller, tries to enter the spa, but is thrown out. Matilda tries to voice her concerns to Derek once he leaves, but he ignores her.
Matilda follows Derek to a pre-runway party, where, upon being challenged by Hansel, Derek loses to Hansel in a "walk-off" judged by
David Bowie. Matilda receives another anonymous call to meet at a nearby cemetery. Matilda along with Derek find the anonymous caller is
hand model J.P. Prewett (
David Duchovny), who explains that the fashion industry has been behind several of history's political assassinations, including
Abraham Lincoln and
John F. Kennedy and the brainwashed models are soon killed after they have completed their task. Katinka (
Milla Jovovich), Mugatu's tough henchwoman, and her aides attack the group, forcing Derek and Matilda to flee.
They decide to go to Hansel's home, the last place they believe Mugatu will think to look. Derek, Hansel, and Matilda bond. Matilda admits the reason she hates models is because she was bullied as a child for being overweight and developed
bulimia, and that she believes models hurt people's self-esteem. Derek and Hansel resolve their differences while partaking of Hansel's collection of narcotics and participating in group sex with Matilda and others. While recovering, Derek also finds that he is falling in love with Matilda. Derek and Hansel break into Maury's office to find evidence of the assassination plot, but they cannot operate his computer to find them. Taking Matilda's words literally, that the "files are IN the computer," Hansel physically takes the computer while Derek leaves for the show.
Matilda tries to intercept Derek before the show, but Katinka thwarts her. As Derek takes the runway, Mugatu's
disc jockey starts playing "Relax", activating Derek's mental programming. Before Derek can reach the Prime Minister, Hansel breaks into the DJ booth and switches the music to
Herbie Hancock's "
Rockit", breaking Derek's conditioning. Hansel and the DJ have a brief "
breakdance" fight before Hansel eventually unplugs the system, moments before Derek was about to snap the Prime Minister's neck. Expecting to reveal the hidden files, Hansel attempts to expose the assassination plot by smashing Maury's computer on the floor, thereby destroying the evidence.
Mugatu attempts to cover up the incident, but Maury steps forward and offers to turn over the evidence of the assassination plot after years of guilt for his complicity in the conspiracy. Mugatu attempts to kill the Prime Minister himself by throwing a
shuriken, but Derek stops him by unleashing his ultimate model look, "Magnum", that stuns everyone and causes the shuriken to freeze in the air in front of Derek's face and fall harmlessly to the ground. In Derek's rural hometown, Larry is watching the event on TV, and proudly acknowledges Derek as his son. Mugatu is arrested, and Derek is thanked by the Prime Minister.
A few years later Derek, Hansel, and Maury are shown as having left the fashion industry to start "The Derek Zoolander Center for Kids Who Can't Read Good and Who Wanna Learn to Do Other Stuff Good Too". Derek and Matilda now have a son named Derek Zoolander Jr., who has already developed his first modeling look.