Charlie Babbitt (Tom Cruise), a young businessman aggressively pursuing his fortune in collector automobiles, hears that the wealthy father from whom he has been estranged for years, has died. He attends the funeral planning to remain only long enough to hear the will and receive the fortune he believes is coming to him. He is shocked to learn that most of the fortune has been left in trust to someone whose name is not disclosed. Investigations lead him to a home for the mentally handicapped where he discovers he has a brother, Raymond (Dustin Hoffman), an autistic savant, who has been housed there since Charlie's early childhood.

Charlie kidnaps him, planning to keep him "hostage" until the institution delivers the half of Raymond's inheritance he believes rightly to be his. On the road, two things happen: 1) he is baffled, angered, and confused by the paradoxical behavior of this genius with no emotional vocabulary and no social skills and 2) he uncovers early memories of Raymond as the "Rain man" who comforted him when he was very small. He takes Raymond to Las Vegas to exploit his card-counting skills, wins enough at blackjack to get kicked out of the casino, and ends up calling Raymond's guardian out to California, hoping to be entrusted with his guardianship.

He is finally convinced, however, that Raymond is indeed incapable of progressing in relationship much beyond where he is, and that he, Charlie, is not sufficiently equipped to care for him. He sends him back to the institution, committed to maintaining relationship not for the money, but for its own sake. Mystified as he is by the brother whose humanity he can't quite fathom, something like love has been awakened in him in the course of his painful journey in caregiving.