A young Peter Parker, while walking through his house, discovers his father Richard Parker's study has been burgled and ransacked, and Richard finds him in the mess. Gathering up all the hidden documents, Richard and his wife, Mary, take him to the home of his Aunt May and Uncle Ben, then mysteriously depart, never to be seen again.
Years later, a teenaged Peter attends Midtown Science High School, where he is bullied by Flash Thompson and has caught the attention of Gwen Stacy. At home, Peter finds his father's papers and learns he worked with fellow scientist Dr. Curt Connors at Oscorp. Sneaking into Oscorp, Peter enters a lab where a "biocable" is under development from genetically modified spiders, one of which bites him. On the subway ride home, he discovers that he has developed spider-like abilities.
After studying Richard's papers, Peter visits Connors, who is missing his arm due to an accident, and reveals he is Richard Parker's son and gives Connors his father's "decay rate algorithm", the missing piece in Connors' experiments on regenerating limbs. Connors is being pressed by his superior, Dr. Ratha, to devise a cure for the dying head of Oscorp, Norman Osborn. In school, Peter gets into trouble after a basketball challenge with Flash in which Peter accidentally shatters the backboard glass. Uncle Ben changes work shifts to meet with the principal and asks Peter to replace him walking home with Aunt May that night.
Meanwhile, Peter gets distracted and helps Connors regenerate the limb of a laboratory mouse. Peter returns home late, having forgotten to pick up Aunt May, leading to an argument with Ben that prompts Peter to storm out. At a nearby deli, a cashier refuses to let Peter buy a chocolate milk since Peter is two cents short; when a thief suddenly raids the store, Peter indifferently observes. While searching for Peter, Uncle Ben attempts to stop the thief and is killed when the gun that the thief was holding discharges into his stomach. The thief escapes as Peter finds Ben on the sidewalk.
Afterward, Peter uses his new abilities to hunt criminals matching the killer's description. After a fall lands him inside an abandoned gym, a luchador-wrestling poster inspires him to create a mask to hide his identity. He adds a spandex suit and builds mechanical devices to attach to his wrists to shoot a bio-cable "web" more easily. Peter accepts a dinner invitation from Gwen, where he meets and has a tense conversation with her father, police captain George Stacy, over the masked vigilante's motives, since George is himself skeptical about him. After dinner, Peter reveals his identity to Gwen and they kiss.
After seeing success with the mouse using lizard DNA, Ratha demands Connors begin human trials immediately if Osborn is to survive. Connors refuses to rush the drug-testing procedure and put innocent people at risk. Ratha fires Connors and decides to test Connors' serum at a VA hospital under the guise of a flu shot. In an act of desperation, Connors tries the formula on himself. After passing out, he awakens to find his missing arm has regenerated. Discovering that Ratha is on his way to the VA hospital, Connors, whose skin is turning green and scaly, goes to intercept him. By the time he gets to the Williamsburg Bridge Connors has become a violent hybrid of lizard and man, tossing cars, including Ratha's, over the side of the bridge. Peter, now calling himself Spider-Man, snatches each falling car with his web-lines and in the process saves a little boy from a burning car.
Spider-Man suspects Connors is the Lizard and unsuccessfully confronts the creature in the sewers. The Lizard learns Spider-Man's real identity via the name on an abandoned camera and follows Peter to school, bursting up through the toilets. The students and faculty flee the school in terror as Peter and the Lizard fight, causing much damage to the school. In response, the police start a manhunt for both Spider-Man and the Lizard. The police corner Spider-Man and Captain Stacy discovers that he is really Peter.
Meanwhile, the Lizard plans to make all humans lizard-like by releasing a chemical cloud from Oscorp's tower, to eliminate the weaknesses he believes plague humanity. Spider-Man confronts and battles the Lizard on the roof of Oscorp Tower and eventually disperses an antidote cloud instead, restoring Connors and earlier victims to normal, but not before the Lizard mortally wounds Captain Stacy. Before his death, Captain Stacy makes Peter vow to keep Gwen safe by "leaving her out of it." Peter initially does so by avoiding going to Captain Stacy's funeral. Later at school, Peter sits behind Gwen in class and is told by the teacher not to make promises that can't be kept but he whispers to Gwen that "Those are the best kind" to which she smiles.
In a closing-credits scene, Connors, in a secret prison cell, speaks with a mysterious man who appears out of the shadows and asks if Peter knows the truth about his parents. Connors replies "No", and demands that Peter be left alone, since Connors himself thinks that Peter is unprepared to hear the truth. The man then disappears back into the shadows.2