News footage datelined Kuala Lumpur: newly elected Prime Minister Hassan (Woodrow W. Asai) of Malaysia promises to increase the minimum wage and eliminate child labor. The screen rolls up to reveal a large, dimly lit space in a warehouse. Clothing designer Jacobim Mugatu (Will Ferrell) has been called on the carpet by a secret international cabal of fashion industry moguls. The cabal is disturbed because the new prime minister's policies will cut deeply into the fashion industry's profits. They direct Mugatu to assassinate the PM using a brainwashed agent -- someone who isn't too bright. Apparently they've done this sort of thing before. Mugatu reluctantly agrees (he'd prefer to concentrate on the upcoming show for his new collection), but wonders where he'll find someone dumb enough.
Cut to a photo shoot where male model Derek Zoolander (Ben Stiller) is being made up while reporter Matilda Jeffries (Christine Taylor) interviews him for an article in Time magazine. Derek says he decided to become a model "the first time I went through the second grade," when he realized how good-looking he was. He shows Matilda a couple of the "looks" -- facial expressions -- he's best known for, including Blue Steel and the "softer" Le Tigre. They look exactly the same. The rest of the scene is intercut with footage of celebrities giving sound bites in praise of Derek Zoolander. Derek tells Matilda about Magnum, a new look he's been working on for 8 or 9 years, but says he isn't ready to show it to anyone.
The TV coverage for the VH1 Fashion Awards starts, naturally, with the arrival of the key players. First to roll up is Derek, who we learn is three-time Male Model of the Year. He's defending his title against the hippie-ish Hansel (Owen Wilson), a fabulously successful rookie. Hansel arrives on a folding scooter and does tricks with a yo-yo as he walks down the red carpet. Next in are Mugatu, who's picketed by protesters supporting Prime Minister Hassan's fair wage laws, and Zoolander's agent, Maury Ballstein (Jerry Stiller, Ben's father) of Balls Models, who arrives in time to stop Derek from revealing anything about Magnum to a TV interviewer.
Inside, Fabio accepts the "Slashie" award for the "best actor 'slash' model and not the other way around." When the Male Model of the Year is announced, Derek mishears the announcement and embarrasses himself by trotting up to accept Hansel's award. In the audience, Mugatu tells Maury that Derek is just the idiot he's looking for to resolve the Malaysian situation. Maury sadly agrees that Derek, now washed up, is "ready."
Derek stumbles out of the awards ceremony, stares at his reflection in a puddle, and asks it who he is. (It doesn't know either.) Hansel rides by and taunts Derek. Derek walks through the city watching his billboard pictures changing to pics of Hansel while a Jumbotron TV replays his award gaffe. He gets home and crashes in his bunk; his three roommates are already asleep in adjacent bunks.
Next morning, Derek's roommates Brint (Alexandre Manning), Rufus (Asio Highsmith), and Meekus (Alexander Skarsgård), who are also male models, sit around complaining about Hansel. Derek, sporting penguin-print feetie pajamas, interrupts the grouse-fest to wonder if they should be doing something more meaningful with their lives -- helping people. His roommies suggest that orange mocha frappuccinos will make it easier to sort out these important issues. Cut to the boys out for a drive with their drinks. They pull into a gas station and start a playful water fight with the windshield squeegees. Derek sees someone discarding a copy of Time and goes off to retrieve it. He's on the cover, but the coverage isn't kind: "Derek Zoolander: a model idiot?" In the background, the water fight has progressed into a (still playful) gasoline fight. Then one of the boys lights a cigarette and the resulting fireball kills all three of them.
Derek gives the eulogy (or eugoogoly, as he pronounces it) at the triple funeral. He uses the opportunity to announce his retirement from modeling (though he's interrupted by the late arrival of Hansel and his entourage). On the way out of the cemetery (St. Adonis), he runs into Matilda, who is failing to persuade Mugatu to talk to her. She apologizes to Derek for the "harsh" Time story and blames her editor for the headline. She asks Derek to help her find background on Mugatu, but he brushes her off.
At Balls Models, Derek tells Maury he wants to go home and reconnect with his family. He also wants to do something meaningful with his life; he dreams of teaching underprivileged children to read. Maury reminisces about Derek's beginnings in the business and how he couldn't turn left to save his ass. (He still can't.) He tells Derek that Mugatu wants to hire him, but he can't convince Derek not to retire.
Cut to Coal Mining Country, Southern New Jersey. In a snakeprint suit with matching luggage, Derek catches up with his father (Jon Voight) and brothers outside the coal mine. He wants to work with them in the mines. His father is dismissive, but Derek insists.
Back in the city, Mugatu is bitchy to a model ("I'm sorry, did my pin get in the way of your ass?") and tells Maury to get Derek back. Derek is doing a fetching but ineffectual turn at coalmining. At a bar after work, a TV commercial in which Derek appears as a mermaid ("mer-man!" Derek insists) is the last straw for his father and brothers. Although Derek pleads that all he ever wanted "was to make you proud of me, Pop," he's disowned and sent packing. In the parking lot, he asks the stars "who am I?" When his absurdly tiny cell phone rings he assumes it's God, but it's only Maury, calling about a fabulous new offer from Mugatu.
In Mugatu's office, after some suggestive byplay between Mugatu and his assistant over an overly foamy latte, Derek is shown the fabulous new offer: an architect's model of the Derek Zoolander Center for Kids who Can't Read Good. Derek is incensed ("what is this? a center for ants?"), but allows Mugatu to placate him after they agree that the center needs to be at least ... three times bigger than the model.
Matilda visits Balls Models to interview Maury about Mugatu; Maury claims to know nothing about him. He advises her to get a push-up bra.
Meanwhile, Mugatu shows Derek the new collection he'll be representing: Derelicte, "inspired by the very homeless, the vagrants, the crack whores who make this wonderful city so unique." He introduces the tall and sinister Katinka Ingabogovinanana (Milla Jovovich), Derek's minder. She takes him to a very exclusive day spa, where he's to get a massage and brainwashing.
Archie (Matt Levin), a flunky at Time who has the hots for Matilda, gives her a big pile of information he's gathered about Mugatu -- but reports that he's found nothing before 1995. A mysterious tipster whose hand is encased in an odd glass contraption calls Matilda and directs her to Pier 12, the location of the spa. She sneaks in and has an awkward conversation with Derek (who unlike Matilda is completely unembarrassed by his post-massage erection) before being thrown out by Katinka, who insults Matilda's wardrobe for good measure. The brainwashing sequence features lots of little animated Mugatus and explains why child labor is a good thing. It conditions Derek to kill the Malaysian prime minister -- who will be the guest of honor at the Derelicte show -- when he hears the '80s hit "Relax" by Frankie Goes to Hollywood.
A week later, Derek wakes up with a start in his bunk at home. Matilda's at the door; she's been looking for him for days. He doesn't quite believe that he was at the day spa that long, even when she shows him the date on a newspaper. He thinks she's coming on to him (which she denies) and turns her down. As she leaves, he mentions that wearing her hair pulled back is bad for her complexion, and performs a quick makeover of her 'do. She looks great (but startled), and wears her hair down for the rest of the movie.
Katinka seems to have staked out Derek's place. She sits in her car muttering about how much she dislikes Matilda.
Back in the Time office, Archie reports his latest discovery: Mugatu's male models "have a bad habit of dying young in freak accidents." Matilda realizes that Katinka is going to kill Derek and rushes off to find him, but the door person at the party he's attending won't let her in.
At the party, Derek saunters around receiving congratulations from celebrities on winning the Derelicte gig. When Hansel bumps into him, he takes offense. Derek challenges Hansel to a "walk-off." Most of the party-goers repair to the old Members Only warehouse to watch the two models resolve their differences. Matilda catches up with Derek on the way, but he won't take the time to listen to her.
A crowd gathers at the warehouse, where there's a runway and a "corner" for each contestant, as in a boxing ring. David Bowie offers to officiate. "This'll be a straight walk-off, old school rules," he says. "First model walks, second model duplicates, then elaborates."
They take turns walking down the runway imitating each other's moves until Hansel comes up with something Derek can't reproduce: he removes his underwear without taking off his pants. Derek hurts himself trying to pull that off.
Riding home with Matilda, Derek shrugs off her warning that Katinka is out to get him because he's despondent at losing another contest to Hansel. He confesses that Hansel could have beaten him with a much simpler move: a left turn. Derek has never been able to hang a louie. As Matilda tries to reassure him, she gets another call from her tipster, who wants to meet her at St. Adonis Cemetery. Derek comes along.
Derek and Matilda stroll the cemetery reading gravestones. Derek notices that none of the male models buried there lived past 30. The tipster turns up and notes that he himself made it past 30. He won't tell them his name. He says they've stumbled on something big: the fashion industry has used male models to carry out "every major political assassination over the last 200 years," including Lincoln (who was targeted because abolishing slavery wiped out the free labor the fashion industry relied on) and Kennedy (because the Cuban embargo cut off the supply of Sansabelt slacks).
Matilda drops her flashlight and the tipster absent-mindedly reaches for it with his left hand, which is covered with an odd glass contraption. Derek recognizes the hand as that of J.P. Prewitt (a scruffy David Duchovny) -- "the world's greatest hand model!" The glass contraption is a home-made hyperbaric chamber meant to preserve Prewitt's hand. Prewitt explains that models make good assassins because they're in good shape, they're famous enough to get past security, they don't think for themselves, and they're used to following directions. He also mentions that when they've completed their missions, assassin-models are killed. Just then, Katinka and some goons start shooting at them. Prewitt tells them to get hold of Maury Ballstein's computer; Maury has protected himself by documenting all he knows about the fashion-industry cabal and the assassinations. In parting, Prewitt offers Derek some encouraging words about Blue Steel and the long-anticipated Magnum.
In search of a hiding place where no one -- and especially Katinka -- will think to look for them, Derek and Matilda go to Hansel's. Hansel is willing to let them in, but first, he makes Derek explain why he's "been acting so messed-up towards me." Derek admits that he feels threatened by Hansel. Hansel says he's been acting messed-up towards Derek because he's intimidated by Derek's reputation, and in fact Derek inspired him to become a male model. "I freakin' worship you, man."
Hansel shows them around his loft, which is huge and full of friends. The three of them sit down together and get high on "tea," and Hansel asks Matilda why she dislikes models so much. She confesses that when she was young she was the fat kid in her class, and she used to pore over the photos in fashion magazines yearning to be thin like the models. Eventually she became bulimic, for which she blames the models. Hansel and Derek don't see the problem with throwing up after meals -- they do it themselves -- and want to know whether it caused guys to show more interest in her. She admits that her sex life is pretty much nonexistent. Hansel suggests they "give in to the power of the tea" and get naked. They all -- including Hansel's friends -- have a lot of sex.
Next morning, Derek tells Hansel he's falling for Matilda. Matilda comes in and reminds them that they have to get hold of the evidence of the assassination plot before the Derelicte show starts in three hours.
Derek and Hansel sneak into Maury's office dressed as maintenance men. Matilda instructed them to find the files on Maury's computer (an orange iMac) and email them to her, but they can't figure out how to turn the thing on. Before leaving for the show, Derek gives Hansel his tiny cell phone, asking him to give it to Matilda if anything happens to Derek. Hansel, having grasped that the files (he's thinking paper) are inside the computer, takes the computer and heads for Derelicte himself. Meanwhile, Matilda checks in at the office, where Archie at last has the goods on Mugatu: Mugatu was kicked out of Frankie Goes to Hollywood before they made it big with "Relax." He broke into fashion by inventing the piano-key necktie.
When she figures out that Mugatu used "Relax" to trigger the conditioning that will induce Derek to kill the Malaysian prime minister, Matilda rushes to the fashion show. Backstage, Derek confronts Maury about the assassination plot, causing Maury to have a change of heart. Derek hits the runway as Matilda arrives and tangles with Katinka. She tells Hansel about the trigger. "Relax" starts playing and Derek's conditioning kicks in, but Hansel has broken into the DJ booth. During a break-dance fight between Hansel and the DJ, the music switches from "Relax" to Herbie Hancock's "Rockit" and back. Every time "Relax" comes on, Derek advances down the runway toward the prime minister. Hansel saves the day by shutting down the sound system just as Derek gets his hands around the prime minister's neck.
Mugatu publicly accuses Zoolander of trying to kill the prime minister. Hansel comes to Derek's defence, revealing the brainwashing and claiming that he has evidence in the computer -- which he proceeds to drop from a catwalk above the stage, expecting to find paper files in the debris. Mugatu thinks the evidence has been destroyed and he's home free, but Maury changes sides and calls his wife to bring his backup files. Mugatu denounces Derek ("Blue Steel, Ferrari, Le Tigre? They're the same face! Doesn't anyone notice this? I feel like I'm taking crazy pills!"). Then, determined to complete the mission, Mugatu throws a shuriken (a stylish M-shaped one) at the prime minister. Derek jumps in front of the PM, turns left (for the first time ever) to face the shuriken, and unleashes Magnum. The Magnum look is so powerful that everyone who sees it is amazed and the shuriken stops dead and falls to the floor. Everyone has something to say about Magnum's beauty and general awesomeness. Even Derek's father, watching the show on TV back home in coal country, is finally proud of him: "That's my kid. That's my son!" Magnum looks exactly like Blue Steel, Ferrari, and Le Tigre.
Cut to the future: Derek, Maury, and Hansel are at the Derek Zoolander Center for Kids Who Can't Read Good (which, it turns out, is a modeling school and which looks much like the architect's model -- but much more than three times larger). They're making a promotional video. Matilda turns up with baby Derek Jr., who has just started to display his first "look." It's exactly like Blue Steel, Ferrari, Le Tigre, and Magnum.