The film opens at a school in New Jersey in 1982, where a boy is picking on another boy. We see Gracie Hart as a child who beats up the bully and tries to help the victim (whom she liked). Instead of thanking Grace the victim criticizes her by saying he disliked her because he did not want a girl to help him. She promptly punches the boy in the nose and sulks in the playground.We go forward in time to where Gracie Hart (Sandra Bullock) works for the Federal Bureau of Investigation with Eric Matthews (Benjamin Bratt) as a Special Agent. We see her on a mission where she does not follow orders from her superior and tries to stop their target from choking. Because of her actions the target takes Grace hostage and tries to escape from the siege. This results in a shootout with the FBI agents surrounding the building. As a consequence, one of her squad members Agent Grant (Gabriel Folse) gets shot. She is put on a desk job by chief McDonald (Ernie Hudson).Grace lives in a tiny apartment with no social life. She eats microwave dinners each night and spends her spare time in workout sessions in her home gym. She uses her FBI badge and siren to beat traffic and cut the line at the local coffee shop.The bureau receives a threat against the 75th annual Miss United States beauty pageant in San Antonio, Texas from notorious domestic terrorist "Citizen". Eric is elected to lead the mission to stop a supposed attack. Grace is the only one in the office with some tangible ideas on the next steps required in this situation. A computer search identifies Hart as the female FBI agent best qualified to go undercover as a contestant (as Miss New Jersey, the original having quit after she was discovered to have been in a pornographic film), although she pays little attention to her femininity. Pageant Organizers Stan Fields (William Shatner) and Kathy Morningside (Candice Bergen) agree to on-board Grace as one of the contestants undercover. Eric wants Grace to get into the top 5 so she has access to all parts of the stage at all times.Beauty pageant coach Victor Melling (Michael Caine), whose reputation was ruined after his last contestant criticized his methods. Victor considers Grace an insult as he has trained 10 out of the previous 11 pageant winners, which his contestant entered. But he is a perfectionist. Victor teaches the tomboyish Hart how to dress, walk, and act like a contestant. She is unused to such behavior. Several suspects exist, including competition director and former pageant winner Kathy Morningside; her unpleasant assistant Frank Tobin (Steve Monroe); veteran emcee Stan Fields who, like Morningside, is being replaced with a younger person; and Rhode Island's Cheryl Frasier (Heather Burns), possibly a radical animal rights activist. Other contestants include May Jo "Texas" (Deirdre Quinn), Karen "New York" (Melissa De Sousa), Leslie "California" (Wendy Raquel Robinson), Alana "Hawaii" (Asia De Marcos) and so on.Representing New Jersey as "Gracie Lou Freebush", Hart impresses the audience by playing the glass harp, (playing music on water glasses). Grace tackles an innocent bystander when she spots a gun on his person and gets an earful from Kathy who says that she has dedicated her life to the pageant, and she will not allow Grace to ruin it. Grace adjusts to the contestant life after getting a pep talk from Eric. She even participates in the swimsuit round in a bikini and answers "World Peace" to the standard question, "what does the society need the most, right now".She unexpectedly becomes friends with Frasier and the other contestants. When Citizen is caught elsewhere, McDonald wants to move the team out. But Grace argues for the FBI to stay and says that Citizen never threatened the pageant, and the letter was sent by a copycat. The handwriting on the letter was different to the past letter, and the DNA test said that the letter was licked by a woman. Grace suspects Kathy, who is getting fired this year and won the pageant after the original winner got food poisoning under mysterious circumstances. Hart gives up her badge and gun and continues the investigation alone.Just as Matthews is going to board the plane back to the bureau, he works out that Hart's suspicions were correct.Hart surprises everyone, including herself, by becoming runner-up to Frasier. This is stunning since the agreement with Kathy was only to get Grace into the top 5, beyond which she was on her own.The agents discover that Morningside and Tobin (secretly her son) impersonated Citizen due to her grudge against the network for firing her. Tobin had a dark, criminal past which he had hidden by changing his last name. Grace figures out that the bomb is in the tiara, when she learns that Tobin took the tiara away for an unscheduled polishing session.They prevent them from murdering Frasier with a bomb in the title tiara. Kathy's plan was to use the murder to prove to the network that only she was capable of guiding the pageant through the crisis. Hart's fellow contestants choose her as Miss Congeniality, and she starts a relationship with Matthews.