Robert Thorn (Liev Schreiber), an American diplomat stationed in Italy, is told that his son died soon after birth. To spare the anguish of his still unconscious wife, Katherine (Julia Stiles), Robert accepts the suggestion of the hospital's Catholic priest, Father Spiletto (Giovanni Lombardo Radice) to secretly adopt another newborn whose mother died in childbirth. Robert and Katherine raise the boy as their own and name him Damien. Robert's career ascends over the course of the next five years. He is named Deputy Ambassador to the Court of St. James (the United Kingdom), and after the ambassador dies in a bizarre accident, becomes Ambassador and settles in to a large estate just outside London. However, disturbing events start to revolve around Damien (Seamus Davey-Fitzpatrick), the most prominent being his nanny hanging herself at his birthday party, driven to do so by a large black German Shepherd.
Soon afterward, Robert is approached by Father Brennan (Pete Postlethwaite), who delivers an eerie warning and seems to know the truth about Damien's birth, at which point Robert has him escorted out. Meanwhile, photographer Keith Jennings (David Thewlis) finds that several of his photographs contain mysterious signs, later revealed to foreshadow a series of shocking deaths. A new nanny, Mrs. Baylock (Mia Farrow), is hired and tells Damien that she has been sent to protect him.
Tension between Mrs. Baylock and the Thorns rises when the nanny starts to make decisions against their wishes, including bringing a large watchdog (a Rottweiler) to the home without their consent. On the way to the previous nanny's funeral, Damien becomes terrified as they approach the church, attacking Katherine. That night Katherine experiences a first premonition/nightmare dream about Damien. The following day a field trip to the city zoo ends with various species of primates going berserk at the sight of Damien. Katherine suspects that there is something not right about her son, but Robert brushes off her concerns. Robert is again confronted by Father Brennan, who tells him that Damien must die and a man called Bugenhagen, located in Megiddo, can show him how. Enraged, Robert sends him away again.
Caught in a torrential storm, Brennan attempts to seek shelter in a church, but the door is mysteriously bolted. A lightning bolt strikes the church steeple, causing him to be impaled by a large steel rod which falls from the roof. Upon discovering she is pregnant, Katherine wants to have an abortion, fearing another child like Damien. Robert refuses to consider it. While watering plants on an upper floor, Katherine is knocked off a chair by Damien riding his scooter, and tumbles over the railing. He ignores her pleas for help and she falls several stories, severely injuring herself and suffering a miscarriage.
After the bedridden Katherine begs her husband, "Don't let him kill me. ", Robert finally accepts that something is amiss with his son. Fueled by Father Brennan's warnings and further information from Keith Jennings, Robert and Jennings go in search of Damien's real mother. After meeting a nun in Rome, they discover that the hospital where Damien was born burned down. They then go to a monastery in Subiaco and meet Father Spiletto, now wheelchair-bound and badly disfigured, who tells them where Damien's mother is buried. They find the grave of Maria Avedici Santoya, Damien's real mother, in the old cemetery of Cerveteri, and discover that it contains the skeleton of a jackal, implying that Damien cannot be human.
In the neighboring tomb, Robert discovers the corpse of a human infant with a cracked skull, revealing that his biological son was murdered at birth. He and Jennings are suddenly attacked by a pack of rottweilers, and barely escape. Meanwhile, Mrs. Baylock visits Katherine in the hospital under the pretense of delivering flowers and then induces an air embolism by introducing air from an empty syringe into her IV, killing her. After learning of Katherine's death, Robert decides to follow Brennan's advice and kill Damien. He goes to Megiddo and meets Bugenhagen (Michael Gambon), who tells them that Damien is the long-prophesied Antichrist, and the only way to destroy him is to take him to holy ground and kill him with the seven sacrificial daggers of Megiddo.
To prove his claims, Bugenhagen tells Robert to examine Damien for the 666 birthmark. Robert at first expresses disbelief, refuses to kill his son and leaves. However, Jennings is determined to go through with the plan, and picks up the daggers. After a brief exchange of words with Robert, he is suddenly decapitated by a falling sign. This pushes Robert to change his mind.
Robert arrives home during a torrential storm. The dog attacks but Robert manages to trap it. He then goes upstairs to Damien's room and quietly cuts away Damien's hair to reveal the 666 birthmark. Mrs.
Baylock attacks suddenly, but Robert is able to fight her off and takes Damien outside to his car. Mrs. Baylock pursues them and Robert runs her over with the car. Robert, pursued by the police, drives to a church to kill Damien on consecrated ground, but as he is about to use the sacred dagger, he is killed by an officer of the Diplomatic Protection Group. Robert's funeral shown in parallel to the death of the Pope is attended by the President of the United States. After the service is over, the Secret Service informs the President that his car is waiting. The President is seen to be holding the hand of Damien, whom he has presumably adopted.
The last shot shows Damien slowly turning to give the camera a diabolical smile..