In San Francisco, California, down-on-his-luck naval aviator Lt. Tuck Pendleton (Quaid) resigns his commission and volunteers for a secret miniaturization experiment. He is placed in a submersible pod and both are shrunk to microscopic size. They are transferred into a syringe to be injected into a rabbit, but the lab is attacked by a rival organization—led by scientist Dr. Margaret Canker (Fiona Lewis)—that plans to seize the experiment and steal the miniaturization technology.
Experiment supervisor Ozzie Wexler (John Hora), knowing their intentions, escapes with the syringe. A chase ensues with one of Canker's henchmen, Mr. Igoe (Vernon Wells), which ends at a nearby shopping mall. After being fatally shot, Ozzie injects Tuck and the pod into an unsuspecting Jack Putter (Martin Short), a hypochondriac Safeway grocery clerk, the first person he comes into contact with.
On regaining consciousness, Tuck is unaware of what has happened and believes he's been injected into the rabbit. After attempts to radio the lab are unsuccessful, Tuck navigates the pod to the optic nerve and implants a camera so he is able to see what the "host" sees. Realizing he is inside a human, Tuck makes contact by attaching another device to Jack's inner ear, enabling him to talk to Jack, initially with embarrassing consequences. Tuck explains that the pod has only a few hours' supply of oxygen and needs his help in order to extract him by going back to the lab.
At the lab, the scientists explain to Tuck and Jack that the other group stole one of two computer chips that are vital to the process. That group's mastermind is Victor Scrimshaw (Kevin McCarthy). His henchmen include Canker, Igoe, and "The Cowboy" (Robert Picardo).
Jack contacts Tuck's estranged girlfriend Lydia Maxwell (Meg Ryan), a reporter who has had dealings with The Cowboy. They learn that The Cowboy plans to buy the computer chip from Scrimshaw. After knocking the Cowboy unconscious using the pod's equipment, Tuck controls the muscles of Jack's face, altering Jack's features so he looks identical to the Cowboy. Lydia and Jack, posing as the Cowboy, meet with Scrimshaw to steal the chip from him. However, as they are about to take possession of the chip, Jack's nervousness overrides the transformation of his face, exposing the scam. Igoe captures Jack and Lydia and takes them to the lab. While imprisoned, Jack and Lydia share a kiss, which, unknown to them, transfers Tuck into Lydia's body through their saliva. Once taken to the lab, the criminals miniaturize Igoe and inject him into Jack to locate Tuck, kill him, and obtain the other chip, which is attached to the pod.
Once Igoe has been injected, Jack and Lydia escape, steal back the chip and order everyone in the lab at gunpoint into the miniaturization device, including Scrimshaw and Canker. However, not knowing how to operate it, they only manage to miniaturize everyone to half the original size. Tuck, now inside Lydia, finds a growing baby and realizes that she is pregnant with his child. By going to Lydia's eardrum and playing their song (Sam Cooke's "Cupid"), he is able to alert them what has happened. Jack and Lydia kiss again to transfer Tuck back. They frantically drive back to the lab in order to enlarge Tuck, not realizing that miniature versions of Scrimshaw and Canker are hiding in the back seat. While the villains attempt to subdue Jack and Lydia, Igoe locates Tuck in Jack's esophagus and attacks him. Tuck disables Igoe's craft and Igoe is killed after Tuck drops him into Jack's stomach.
Back at the lab, with only minutes of supplemental oxygen left in the pod, Jack follows Tuck's instructions to eject the pod from his lungs by making himself sneeze. Tuck and the pod are successfully enlarged, and he is reunited with Lydia and finally gets to meet Jack in person. The film ends at Tuck and Lydia's wedding, held at Wayfarers Chapel, where Tuck wears the chips from the experiment as cufflinks. When they climb into the limousine, it is revealed that Cowboy is the driver and Scrimshaw and Canker are hiding in the trunk, inside a suitcase. Now confident and in control of his life, Jack recognizes the Cowboy and jumps into Tuck's vintage 1967 Mustang, pursuing the limousine to rescue the newlyweds.1988 Academy Award for Best Visual Effects, Won (Bill George, Dennis Muren, Harley Jessup and Kenneth F. Smith)
1988 Academy of Science Fiction, Fantasy & Horror Films: Best Director, Best Science Fiction Film, Best Special Effects, nominated
The movie had a positive reception. Currently, the review aggregate Rotten Tomatoes reports that 81% of critics have given the film a positive review based on 36 reviews, with an average score of 6.6/10 and the critical consensus: "A manic, overstuffed blend of sci-fi, comedy and romance, Innerspace nonetheless charms, thanks to Martin Short's fine performance and the insistent zaniness of the plot."