During the filming of Vietnam veteran John "Four Leaf" Tayback's (Nick Nolte) memoir Tropic Thunder, the stars—fading action luminary Tugg Speedman (Ben Stiller), five-time Academy Award-winning method actor Kirk Lazarus (Robert Downey, Jr.), rapper Alpa Chino (Brandon T. Jackson), low-brow drug-addled comedian Jeff Portnoy (Jack Black), and character actor Kevin Sandusky (Jay Baruchel)—behave unreasonably, resulting in a $4 million explosion going off with no cameras rolling. With filming a month behind schedule only five days into shooting, the media dubs the production "the most expensive war movie never made". Rookie director Damien Cockburn (Steve Coogan) is ordered by studio executive Les Grossman (Tom Cruise) to get the production back on track or risk having it shut down.

Acting on Tayback's advice, Cockburn drops the spoiled actors into the middle of the jungle, where he installs hidden cameras and special-effect explosions rigged so he can film "guerrilla-style". The actors have only a map and a scene listing to guide them to the helicopter waiting at the end of the jungle. Shortly afterward, the director is blown up by a derelict land mine left by the French during the First Indochina War, but only Lazarus, and to a certain extent Sandusky, realize his death was real.

Unbeknownst to the actors, they are dropped in the middle of the Golden Triangle, the home of the heroin-producing Flaming Dragon gang. The Dragons believe the actors to be Drug Enforcement Administration agents. When Tayback and pyrotechnics operator Cody Underwood (Danny R. McBride) attempt to locate the now-deceased director, they are captured by the drug producers, at which point Tayback is exposed as a fraud when the prosthetic hooks on his hands fall off. The actors continue to trek through the hostile jungle. After Lazarus and Sandusky discover that Speedman is leading them the wrong way, they split off from him with Portnoy and Chino and leave Tugg continuing to follow the film's script.

Slowly going insane, Speedman is captured and taken to the Flaming Dragon's heroin factory, which he initially believes to be a prisoner-of-war camp from the script. The gang soon realizes that he is the star of the box office bomb Simple Jack (the only movie they have, on VHS) and force him to reenact it several times a day. Meanwhile, in Los Angeles, Speedman's agent, Rick Peck (Matthew McConaughey), is trying to negotiate with an uninterested Grossman a to-date unfulfilled term in Speedman's contract that entitles him to a TiVo on location when they are contacted by the Flaming Dragon gang and are asked for a ransom. Grossman instead curses out the gang and later tells Rick that they can benefit more by collecting the insurance claim on Speedman's death, even offering the agent a share of the profits along with his own personal airplane.

The other actors stumble upon the Flaming Dragon's heroin factory. After seeing Speedman being tortured, they plan an ambush based on the film's plot line. Lazarus impersonates a farmer who has caught Jeff in his farm, distracting the armed guards so Chino and Sandusky can sneak into the building where the captives are held. After the gang notices inconsistencies in Lazarus' story, the actors open fire on the gang, temporarily subduing them.

Portnoy, Sandusky, Chino, and Lazarus find Speedman and attempt an escape in Underwood and Tayback's recaptured helicopter. The gang quickly rejoins, crossing a bridge that Underwood rigged to detonate. Speedman asks to remain behind with his "family", but he quickly returns with the murderous Dragons in hot pursuit. Tayback detonates the bridge just in time for Speedman to reach safety, but as the actors and crew escape from the jungle, the gang fires a rocket-propelled grenade at their helicopter. A disheveled Rick unexpectedly stumbles out of the jungle carrying a TiVo box and throws it in the path of the RPG, saving them all.
Footage from the hidden cameras is compiled into a feature film, Tropic Blunder, which ends up becoming a major critical and box office hit and a multiple-Academy Award winner. The film breaks Speedman's streak of flops and he wins the award for Best Actor, which is presented to him by the previous year's winner, Lazarus.

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