Jason Shepherd (FRANKIE MUNIZ) is a normal 14-year-old who has one major problem - he makes up lies all of the time. When he does so to his eighth grade teacher, Mrs. Caldwell (SANDRA OH), about not writing an essay, he's busted when his parents, Harry (MICHAEL BRYAN FRENCH) and Carol (CHRISTINE TUCCI), prove him wrong.
Given one last chance and just a few hours to write that essay else he be sent to summer school, Jason writes a story entitled "Big Fat Liar" and then races to get it to his teacher before the deadline. Unfortunately, he runs directly into a limo containing Hollywood producer Marty Wolf (PAUL GIAMATTI), who wants nothing to do with the boy or his plight. Yet, when Jason accidentally leaves his essay in Marty's limo, the unscrupulous producer happens to read it and then realizes he's found his next film.
Meanwhile, with no one believing Jason's story about his missing essay, he's forced to go to summer school. One night, while attending a movie with his best friend, Kaylee (AMANDA BYNES), he sees a preview for a movie based on his story. With both his and Kaylee's parents out of town, the two kids hop a plane from Michigan to Los Angeles to confront Marty about stealing his idea.
Lying to limo driver Frank Jackson (DONALD FAISON) to get a ride around Hollywood and then to Universal Studio's back lot, the two discover that they must sneak in to see the busy executive who's currently shooting a movie starring Jaleel White (JALEEL WHITE) with the aid of veteran stuntman, Vince (LEE MAJORS), and Marty's personal assistant, Monty Kirkham (AMANDA DETMER).
With pressure from the new studio president, Marcus Duncan (RUSSELL HORNSBY), to deliver a hit, Marty has no time for Jason and his allegations, and basically tells him he's out of luck. Accordingly, and from that point on, Jason and Kaylee do what they can to make Marty's life miserable and convince him to call Jason's dad and tell him the truth about stealing Jason's story.