In New York City, two singer/songwriters, Chuck Clarke (Dustin Hoffman) and Lyle Rogers (Warren Beatty), stare at the window of a Sam Goody record store. Chuck insists the only difference between them and hit makers like Simon and Garfunkel or Bruce Springsteen is that they do not have an essential ingredient: an agent. Soon, Chuck invites talent agent, Marty Freed (Jack Weston), to watch them perform their material at the store Song Mart. Afterward, Marty informs the duo that they have no stage talent. They need patter, "shtick," and gimmicks.For their next tryout, Chuck and Lyle (playing as their duo act called 'Rogers and Clarke') cover a familiar song with awkward choreography at a local nightclub. Despite audience booing, Marty offers them two bookings, one in Honduras at a hotel frequented by American journalists, and another longer engagement in Morocco. Chuck and Lyle mull Marty's offer at a nearby bar.In a series of flashbacks to five months earlier, Lyle was working by driving an ice cream truck, writing song lyrics as he worked. He played new songs for his speechless wife, Willa (Tess Harper). At a restaurant, Chuck played piano for customers. Afterward, as Chuck and his girl friend, Carol (Carol Kane), chatted, a waiter delivered a note from Lyle saying how much he enjoyed Chuck's performance. The songwriters met and had instant rapport, furiously collaborating on songs. They spent so much time composing that Willa left Lyle due to neglect. He sank into a depression, then Chuck helped him recover. Soon, Carol also felt neglected and ended her relationship with Chuck. He called Lyle and threatened suicide. Lyle promised to come to Chuck's aid, but his friend asked him not to alert the police because it would ruin his show business career. However, Lyle called the police, and Chuck climbed onto the ledge of his building when an officer appeared at his apartment. As Lyle joined Chuck on the ledge, Rabbi Pierce appeared to calm Chuck. Lyle grabbed Chuck's hand, and guided him back into his apartment.At the bar in the present day, Chuck remembers all that he and Lyle went through and decides they should take their act to Morocco.In Ishtar, Morocco, as a desert archaeological camp is attacked, Professor Barnes orders his associate, Omar (J.C. Cutler), to escape with an important, newly discovered ancient map that could provoke war in the Middle East. Omar barely has time to give his sister, a left-wing French-Moroccan agent named Shirra Assel (Isabelle Ajani), the map before he is killed. His last words promise that no one will find the map except "two messengers of God."At the Ishtar airport, Shirra Assel, disguised as a man, approaches and persuades Chuck to exchange passports and suitcases with her so she might travel to Marrakesh. She quotes: "It is a matter of life and death." She convinces him that he can visit the American Embassy and have his passport easily replaced. When the duo learns that a new passport will take days to process, Chuck convinces Lyle to travel to nearby Marrakesh and do the show alone, while he checks into a hotel in Ishtar.At the Marakesh Hotel, another American, named Jim Harrison (Charles Grodin), invites Lyle to dinner. After Chuck chats about show business, Jim reveals he works for the Central Intelligence Agency (CIA). He is in Morocco to prevent the Communists from staging a coup to overthrow the royal Moroccan government. Jim hints that his agency likes to recruit people like Chuck as operatives.At his solo show, Lyle launches into a rendition of "Bridge Over Troubled Water," and is soon drowned out by an apathetic crowd. Suddenly, Chuck appears and belts out "That's Amore," and show tunes that revive the audience. The new act of Rogers and Clarke, are a hit and are applauded. Later, Chuck says he is going for a drive to get some air.Later that night, Shirra wakes Lyle in his hotel room as she tries to reclaim her suitcase. As Lyle tackles her, she claims Chuck is a CIA agent, and the contents of the suitcase are necessary to overthrow the tyrant running her country. Lyle is skeptical about her story, but she convinces him to help her find a camel seller named Mohammed, and buy a blind camel. She leaves carrying the heavy suitcase.Meanwhile, Chuck secretly meets Jim Harrison, and learns his movements have been tracked through a pen with a hidden microphone that Jim gave him as a gift. The CIA has reason to believe that dictator Muammar Gaddafi in Libya is interested in Shirra's map, and the CIA wants to take possession of the document before Gaddafi does. Chuck claims not to know where Shirra is. However, Jim Harrison believes Lyle knows where to find her after appearing to have a sexual encounter with her at the hotel, and being recruited by her as a left-wing terrorist. Chuck does not believe any of Harrison's assertions but Harrison gives Chuck a beeper to stay in contact.In the morning, Lyle sneaks out of the hotel room, and Chuck follows him. The friends meet and CIA agents follow them to an outdoor market. Chuck and Lyle are kidnapped, but Harrison's associates shoot the captors and panic breaks out. The two friends run, and ask an enterprising local to help them hide. The youth takes them into his uncle's rug shop. The kidnappers confiscate two rolled up rugs, thinking the songwriters are hidden inside. Dressed in Moroccan garments, Chuck and Lyle escape over the rooftops.Meanwhile, Harrison visits Emir Yousef (Aharon Ipalé) at his palace in Ishtar to explain that the Americans, Chuck and Lyle, are merely pawns. The Emir insists the songwriters will be mistaken for "messengers of God." If radical Shiites gain possession of the map they will use it as a sign to overthrow the Emir. The Americans must be killed to demonstrate that God does not favor those who oppose the Emir.As Lyle negotiates for a blind camel at the Ben Sheli Camel Market, Chuck confronts Shirra in a nearby hotel room. He accuses her of recruiting Lyle as a Communist but she denies it. She thinks he stole her map and gave it to Jim Harrison. He denies it but promises to keep her secret. When Chuck finds Lyle, he has bought a blind camel with poor teeth. As Lyle leaves to change his disguise, Harrison appears and warns Chuck that the Emir's men want to kill them. Harrison hands Chuck two canteens with water, and a compass with escape instructions. When they reach a safe hotel at a desert oasis, CIA agents are supposed to rescue them, but it is a ruse. Harrison hopes that the desert trek will result in their deaths.Meanwhile, Shirra's associates convince her the songwriters must be executed. Shirra gives Lyle a beaded necklace with instructions to drop a trail of beads, heading into the desert. At night, the beads will glow and the friends can find their way back to town.The next morning in the desert, Chuck collapses from heat exhaustion. As Lyle helps his friend, vultures appear. Elsewhere, an associate of Shirra's tells Prof. Barnes they plan to announce over radio that they are in possession of the ancient map.The songwriters survive a sandstorm and think they see Moroccans with a truck. Chuck instructs Lyle, dressed in flowing robes, to get water. The Moroccans are actually Australian gunrunners who mistake Chuck for an auctioneer. As Chuck pretends to auction guns to the locals, CIA agents see that the songwriters have stopped moving through the desert and send a helicopter to retrieve their bodies. When the helicopter pilot realizes they are alive he retreats, and the auction is cut short.At his palace, the Emir tells Harrison he wants the "the messengers of God" killed and the helicopter returns to the desert.Parched and exhausted, Chuck and Lyle think of song lyrics to keep alert, and soon discover Shirra's map sewn into the lining of Chuck's jacket. Just then the helicopter appears and when the pilot shoots at the songwriters, they return fire with guns they collected from the auction. The helicopter leaves but returns with a second Apache attack helicopter. However, Shirra appears in a truck. She arms Chuck and Lyle with powerful guns, and the two helicopters are forced to abort their mission.Chuck and Lyle manage to smuggle the map into the United States. Back in New York, Marty, the talent agent, negotiates with Harrison to implement social reforms in Morocco, get rid of the Emir, and back and promote an album and worldwide tour for Chuck and Lyle. If the CIA succeeds, the songwriters promise not to sell the map to the KGB or anyone else. As a show of support, Harrison arranges for American forces and CIA agents to attend Chuck and Lyle's show at Chez Casablanca. Shirra thinks their songs are wonderful.In the final scene, back in America, Chuck and Lyle's "Live in Concert" album can be seen in the window of Sam Goody records.