In the opening scene, set in a parking lot, a teenage filmmaker named Eric (Matt O'Leary) is attempting to document the faux-gangsta lifestyle enjoyed by Allison (Anne Hathaway) and her boyfriend Tobys (Mike Vogel) gang of white upper-class teenagers living in the Pacific Palisades neighborhood. During this sequence, a brawl arbitrarily ensues between Tobys gang and another gang, which ends with both sides fleeing just before police arrive. Later that night, Tobys gang goes to a party at Erics house, and Allisons relationship with Toby as well her other friends Emily (Bijou Phillips) and Sam (Joseph Gordon-Levitt) is further revealed. At the end of the party, Allison and her boyfriend have sex at the back seat of the car. The scene ends with Allison giving him a blowjob. The next day, Allison meets with her father (Michael Biehn) at work to discuss family problems, the awkward conversation revealing the virtually non-existent relationship Allison has with her parents. Afterwards, she and her friends drive downtown into East LA, intent on buying marijuana, eventually encountering Latino drug dealer Hector (Freddy Rodriguez) and his crew.
Toby and Hector make a deal, but Toby believes that Hector did not sell him enough for what he paid, and attempts to confront Hector, who pulls a gun on him, humiliating him in front of his friends. Allison persuades Hector to leave Toby alone. The next night, Allison and her girlfriends return to the location of the drug deal. There, she and her friends once again meet up with Hector and his crew, who invite them to a party at his house. Before they leave, Hector informs Allison of a motel where his crew regularly party, and invites her to stop by if she wishes. The next day, Eric continues his film project at Allisons home, with Allison turning his interview of her into a bizarre mind-game.
That evening, Allison meets up with Hector again in a store, and he shows her around his neighborhood, while talking about his family and lifestyle. His guided tour abruptly ends when the police arrive in force, ostensibly on a drug bust. Allison winds up being arrested with the other present gang members, but save for an argument with her parents and Toby is let off the hook. The experience only serves to increase Allisons fascination with the inner-city lifestyle. The night after her release, Allison and Emily agree to head downtown the next evening to hang out with Hectors crew. Allison and Emily meet up with Hector and his gang at a motel, and a night of partying and drinking results in Allison and Emily asking Hector if they can join his crew.
Hector informs them of their initiation; to join the gang, the two must roll a dice; the number they roll corresponds to the number of gang members they must have sex with to join. Allison rolls a one, Emily rolls a three. Hector and Allison pair off and get into bed, but Allison has second thoughts and pushes him away saying that she "can't stand it". He forcefully pushes her back down, but lets her go when she begins to phsycially protest. Allison tries to get Emily to leave with her, but Emily is determined to follow through with the initiation.
The gang, annoyed by Allison's protests, kick her out of the room where she sits, waiting. Allison, still waiting outside, hears a scream from inside the room and rushes in to find Emily crying out in pain with two guys on top of her forcing double penetration. Emily screams for them to stop and the guys storm out of the room, Hector cursing at them furiously in Spanish. The two girls leave the motel, distraught over what just occurred.
The next day after school, Allison returns to the motel and confronts Hector over what had happened the previous night. Hector responds by calling her a poser who knows nothing about the realities of gang life. The same day, Emily is shown at a police station, accusing Hector and his crew of gang rape. Allison is brought in for questioning, but claims to know nothing about a rape.
Hector is subsequently arrested, but quickly makes bail with his drug money that he has. Hector and the members of his crew vow to seek out and silence Allison and Emily, but wind up getting lost in Bel-Air. Meanwhile, Toby and his gang are shown posing with guns in front of Eric and his video camera, making clear their intent on seeking revenge on Hectors crew for Emily's gang rape. Eric later shows Allison the footage, and Allison subsequently calls Toby and makes an ill-fated attempt to convince him that there was no rape and what he is doing is foolish.
Allison then heads to Emily's house and reveals to her what Toby plans to do, and reveals to Emily's parents the truth about what happened at the motel. Allisons revelation of the truth to Emilys parents initially upsets Emily to the point of nearly attempting suicide, but eventually the two reconcile. Meanwhile, Toby and his gang arrive at Hector's motel and bust in violently, but only succeed in frightening a group of Latino women and a baby. Realizing their error, they leave, and on their drive home, the gang passes the SUV containing the members of Hector's crew that had been looking for Allison and Emily. The two gangs exchange looks, and the screen subsequently cuts to black. For a few seconds, only the sounds of tires squealing, people shouting and gunfire is heard as Hector and Toby's gang fight it out. In the final scene of the movie, Eric wraps up his film project with Allison saying that: "teens will be teens, but if adults are willing to reach out to them to connect and give them even just a small amount of insight, it's like they suddenly know everything.