In the fall of 1954, the Kurtzmans, a Jewish family, live in Forest Park, a suburban neighborhood in the northwest section of Baltimore. At the beginning of the film, Nate, the father, runs a burlesque theatre, and engages in a community numbers racket. His wife Ada stays home and takes care of the household. Van, the older son, attends the University of Baltimore, while Ben is finishing his final year in high school.
Ben meets Sylvia, an African-American girl, who begins attending his school after the district has been integrated. Ben immediately starts to develop feelings towards Sylvia, and introduces himself. The two become close based on a mutual love for Little Richard, James Brown, jazz musicians, and black comedians. Sylvia's father, an affluent doctor, disapproves of their relationship and forbids them to see one another.
On Halloween, Ben dresses up as Adolf Hitler, which offends his parents greatly. Van and his friends head over to a party in a predominantly bourgeois, gentile section of Baltimore. Van is attracted to a mysterious blonde woman. A fight between one of Van's buddies and a gentile erupts and Trey, one of the party-goers, drunkenly crashes his car into the house. Van must leave the mystery woman.
Trey goes to court for the car crash. Van and his friends are there as witnesses. After the court session expires, Van asks several of the other party attendants about the blonde woman he met. Trey discovers that the girl Van has fallen in love with is Dubbie, his own girlfriend.
Meanwhile, Nate's burlesque theatre has problems. In order to boost returns on the numbers game, an additional bonus number is added which will increase the pay-off. Little Melvin, a local drug dealer, makes a large bet, defies expectations and hits the number. Unable to pay on such big win, Nate is forced to cut Melvin a 'slice of the pie'. When Nate offers Melvin the numbers business instead, Melvin claims that Nate is trying to "Jew" him out of his money and a fight breaks out between their bodyguards.
Sylvia gives Ben two tickets to see James Brown & The Famous Flames in concert. At the concert Ben and his friend are the only white patrons in the audience. Van and his friends head out to a gathering, where he again runs into Dubbie and learns of her relationship with Trey.
Little Melvin then spots Nate's car off of Pennsylvania Avenue in the African American neighborhood where James Brown is in concert and after seeing Ben and his friend inside, he deduces that one of them must be Nate's son. After the concert, Melvin abducts Ben, Sylvia and their friends from the concert in a payback to Nate's racket.
Van has word that Trey is in surgery after a car accident. He and Dubbie go see him in Virginia.
Nate and his associates at the nightclub are charged and booked with prostitution and racketeering. Before leaving for prison, he manages to attend Ben and Sylvia's high school graduation. She is attending Spelman College, a historically black college in Atlanta; he is staying to attend the University of Maryland.
As the film closes, the scene shows Ben's family attending a Jewish ceremony as the father walks out of the synagogue and blows a kiss to his wife. In a voice-over of Ben's adult voice, he reflects on his childhood with memories of his kiss with Sylvia, his father, and his bittersweet coming-of-age in 1950s Baltimore.
Liberty Heights marked the last appearance of Ralph Tabakin, who appeared in cameo roles in every Levinson movie since his first, Diner (1982), a run of some fifteen films. Tabakin died in 2001.
The film earned positive reviews from critics, as Liberty Heights currently holds an 87% rating on Rotten Tomatoes based on 46 reviews with Critics Consensus: A moving film with moments of humor, Liberty Heights succeeds in capturing the feel of the 1950s with great performances and sensitive direction.
Two Liberty Heights soundtracks were released on January 4, 2000: one of the score by Andrea Morricone and one of the music appearing in the film.