Along Mulholland Dr. above Los Angeles, an attractive brunette woman (Laura Elena Harring) rides in a limousine. Suddenly, the driver stops and orders her out of the car at gunpoint. Before she can exit, a car driven by joy-riding teenagers plows into the limo. The drivers are killed and, in a daze, the woman stumbles down the hillside and into Hollywood. She then falls asleep in the bushes in front of a nice but old apartment complex. The next morning, she sneaks into one of the apartments as its tenant, Ruth Elms (Maya Bond), leaves by taxi with her luggage. Meanwhile, two police detectives (Brent Briscoe and Robert Forster) at the scene of the accident realize that someone walked away from the accident and begin their search.At a Winkie's restaurant, Dan (Patrick Fischler) tells Herb (Michael Cooke) about a frightening dream he has had involving an evil entity living in the alley behind the restaurant. Herb insists they investigate. As they reach the alley, a crone with charred or diseased skin lurches out at Dan, who collapses.Betty Elms (Naomi Watts) arrives from Deep River, Ontario, with hopes of making it big as an actress. Ruth is her aunt and is allowing Betty to stay in her apartment while she is away filming in Canada. When Betty arrives, Coco Lenoix (Ann Miller), the friendly building-owner, greets her and lets her in. Exploring the apartment, Betty finds the brunette cowering in the shower. Betty assumes the woman is a friend of her aunt's. The unknown woman is dazed and confused and just wants to sleep. The brunette woman explains that she had an accident. Inspired by a movie poster, she takes the name Rita but admits she doesn't remember who she really is. Betty and Rita open Rita's purse and find thousands of dollars and a bizarre blue key. They hide these objects in a hat box and decide to solve the mystery of Rita's identity together.Filmmaker Adam Kesher (Justin Theroux) is in a meeting with his agent, two producers and the thuggish Castigliane brothers (Dan Hedaya and Angelo Badalamenti). The brothers show a picture of an attractive blonde and order the filmmakers to cast Camilla Rhodes in the new film. Adam angrily leaves and smashes the brothers' limousine with his golf club. He then drives home and finds his wife Lorraine (Lori Heuring) in bed with the pool cleaner Gene (Billy Ray Cyrus). Adam and his wife fight, he takes her jewellery box with all her jewells and pours pink paint in. The three tussle and the muscular pool guy throws Adam out. Later, some goons appear at the house, looking for Adam. One of them beats up the wife and the pool boy. Meanwhile, Adam goes to a low rent motel downtown. The proprietor, Cookie (Geno Silva), tells Alex that bankers called him to say that Adam was broke, a fact which gets confirmed by Adam's female assistant. She also tells Adam that "the Cowboy" (Lafayette Montgomery) wants to meet with him at a corral in Beachwood Canyon. At their meeting, the Cowboy tells Adam he must cast Camilla Rhodes (Melissa George) in some scenes.Somewhere else, Joe, a hit man (Mark Pellegrino), kills an acquaintance in order to confiscate a black address book. Because of his incompetence, he winds up having to kill two other people, a fat lady who sells healthy food in the next apartment (Diane Nelson) and a dumb cleaning clerk (Charles Croughwell). Also, he sets all the alarms on. Later, he tells a prostitute to be on the lookout for a brunette woman who recently went missing. Also, one of Coco's guests is Louise Bonner (Lee Grant) who tells Betty that Rita has a big problem coming on. Coco tells Betty that sometimes Louise can see what's going to happen, and that Ruth is very frightened, and also advises Betty to put Rita out.Aunt Ruth has arranged for an audition for Betty. Betty does so well that the casting director immediately takes her to see Adam Kesher. They arrive at the studio and Betty and Adam make eye contact and seem to connect. Adam listens to Camilla Rhodes sing and announces she has the role. Betty rushes back to Rita at the apartment as they had a plan to investigate. Rita remembered the name "Diane Selwyn" because a waitress had the same name, Diane, (Missy Crider) at the beforementioned Winkie's, and they look up her address in the phone book. But when they go to her apartment, they find a decomposing corpse in the bedroom. The body resembles Dianne Selwyn. Distraught, Rita tries cutting off her hair when she and Betty return home, but Betty persuades her to wear a blonde wig instead. That night, Betty and Rita make love. Betty tells Rita she is in love with her.Rita wakes up speaking in Spanish and, despite the late hour, insists that Betty accompany her to Club Silencio. In her blonde wig, Rita looks like Betty. At the club, Rebekka del Rio (herself) lip synchs a Spanish version of Roy Orbison's "Crying." Betty and Rita, deeply moved, cry. Then Betty finds a blue box in her purse. She and Rita return to the apartment and take the key out of the hat box. Betty suddenly disappears, leaving Rita to open the box with the key. The box seems to swallow the bedroom, then drops to the floor. Aunt Ruth enters the bedroom looking as if she heard a sound, but it is empty of even the box. In Diane Selwyn's apartment, the Cowboy tells her it is time to wake up.Diane Selwyn (Naomi Watts) wakes up in her bed, apparently from a dream in which she was Betty. She finds a normal door key, coloured blue, on her coffee table. She then sees Camilla Rhodes (Laura Elena Harring) in the kitchen, and is overjoyed until she realizes it is a hallucination. Diane and Camilla were lovers who had met on the set of a film. Diane had wanted to play the lead but the role went to Camilla instead. Since then, Camilla had managed to secure small roles for Diane. But she was growing tired of the relationship and broke it off. Diane was devastated. Camilla's open flirtation with director Adam Kesher made the pain all the worse. The final humiliation came when Camilla invited Diane to a dinner party at Adam's house on Mulholland Drive. Camilla met Diane at the same spot where the accident would occur in Diane's dream and led her along a romantic secret path to the house. But once inside, Camilla kissed another woman -- Camilla Rhodes from Diane's dream -- and announced her engagement to Adam, in front of Coco, who happens to be Adam's mother.Enraged, Diane hired Joe (Mark Pellegrino) to kill Camilla. They met at Winkie's, where Dan watched them. Behind the restaurant, the burnt crone fondled a box identical to the one in Diane's subsequent dream. Joe tells her that once he has completed the job, he will leave a blue key in her apartment -- the exact key that Diane has now found. With reason to believe that the police are closing in, and plagued by bizarre hallucinations, Diane commits suicide.*****As the film begins, a surreal image of people doing the jitterbug is shown. The sound of a cheering crowd accompanies a ghostly image of a young blonde woman and an old couple, all of whom are smiling (apparently before said crowd). The final image of the blonde woman waving dissolves into a point-of-view shot, with the camera panning over a bed and moving into a pillow. The scene then fades black and switches to a street sign"MULHOLLAND DR."illuminated by headlights. A young, dark-haired woman (played by Laura Harring) is being driven up Mulholland Drive in Los Angeles late at night. She is threatened by two men inside the car with a gun. Before they can kill her, however, their limousine is smashed into by a carload of drag racing teenagers. The nameless, dark-haired woman suffers from a head injury and subsequent amnesia. As the sole survivor of the crash, she wanders down the hillside into L.A., finds refuge behind some bushes, and falls asleep. The next morning she awakes and sneaks into a vacant apartment. A young and perky aspiring actress named Betty Elms (played by Naomi Watts), who has just arrived in Hollywood from Deep River, Ontario, moves in and discovers her in the shower. It is revealed that the apartment, which is part of a complex managed by a feisty older woman named Coco (played by Ann Miller), belongs to Betty's Aunt Ruth, who is away making a movie in Canada. The dark-haired woman sees a poster for the movie Gilda starring Rita Hayworth and decides to call herself "Rita". She tearfully admits to Betty that she has amnesia, and together the two of them try to piece together her identity. While going through Rita's purse for clues, they discover $50,000 in cash and an unusual blue key.Betty (Naomi Watts) arrives in Los Angeles; pictured with Irene (Jeanne Bates)Strange, seemingly unrelated events follow. At Winkie's, a local diner, a man named Dan tells his companion Herb about a recurring nightmare involving a shadowy person living behind the restaurant. When Herb encourages Dan to confront his fear by exploring the rear parking lot, he encounters a terrifying figure and collapses from fright.One subplot involves the efforts of shady film executives to strong-arm a young, arrogant director. The director, Adam Kesher (played by Justin Theroux) finds his latest project stolen by men who appear to be mobsters, who show him a headshot of an unknown blonde actress named Camilla Rhodes (played by Melissa George) and order him to cast her as the film's lead. When Kesher refuses, his life is turned upside down. Returning home, he stumbles upon his wife in bed with the pool cleaner (Billy Ray Cyrus), who beats him up and throws him out of the house. Kesher checks into a seedy hotel, upon which the manager informs him there is trouble with his credit cards. Kesher then receives a call from his female assistant who informs him he is out of money, and that the film's cast and crew have been let go. The assistant also passes on instructions summoning him to meet "the Cowboy" at a ranch just outside of L.A. Kesher, skeptical but compliant, arrives and finds a threatening man dressed as a cowboy. He tells Kesher that he must give the role to Camilla Rhodes to avoid further trouble. At the next casting call, the actress whose headshot he had seen, Camilla Rhodes, arrives and auditions. The casting director asks him if he has something to say, whereupon Kesher obediently declares, "This is the girl."In another subplot, a bungling hit man steals a "black book" of names and addresses, leaving behind three dead bodies. He, along with two police detectives, are all trying to track down the dark-haired woman now known as "Rita".Meanwhile, Betty goes to a Hollywood acting audition and performs brilliantly. She is then taken to a sound stage where she catches a glimpse of Adam Kesher, who has just caved in to the mobsters' demands by hiring Camilla Rhodes for his new picture. Betty abruptly flees from the sound stage to pick up Rita, following a clue to the apartment of a mystery woman named Diane Selwyn. This leads to their discovery of a rotting corpse, which is presumably a murdered Diane. Rita, fearing that the same people who harmed Diane are after her as well, decides to disguise herself by wearing a blonde wig. That night, Betty and Rita become lovers and sleep together.Rita later awakens and insists that she and Betty attend a performance at an eerie midnight theater called Club Silencio, during which Betty begins shaking and both women cry uncontrollably. After Betty discovers a small blue box in her handbag, both women return to their apartment. Betty suddenly vanishes and Rita, finding herself alone, opens the blue box with the blue key from her purse.An emotionally hurt Diane (Naomi Watts) exchanges words with Camilla (Laura Harring). After this, an entirely new reality suddenly emerges. Betty wakes up and finds herself a depressed and lonely failed actress named Diane Selwyn. While alone in her apartment, Diane appears to flashback to recent traumatic events. Her former lover, an actress named Camilla Rhodes (now played by Harring), has abandoned her to pursue a life of riches and glamour by marrying a successful director, the same Adam Kesher who appeared earlier in the film. Feeling betrayed and humiliated, Diane meets the same hit man from the previous reality at Winkie's diner and pays him thousands of dollars in cash to kill Camilla. After receiving confirmation that Camilla has been killed (by the appearance of an ordinary blue key) and now under police suspicion, the guilt-stricken Diane loses her mind, is terrorized by hallucinations, and shoots herself.****Diane Selwyn (Naomi Watts), an idealistic, ambitious and naive young woman, wins a jitterbug dance contest in Deep River, Ontario, that offers a trip to Hollywood as first prize. Late in the film, we discover that Diane has traveled to LA to pursue an acting career but has been disappointed by most of her encounters with film industry people (especially men) and has failed to find success. Instead she strikes up a romance with a charismatic and successful actress Camilla Rhodes (Laura Harring), who gets a big part Diane had applied for but uses her influence to get Diane bit parts.Camilla treats Diane carelessly, dumping her to marry her director Adam Kesher, as well as to pursue a new romance on the side with a young un-named actress. Things come to a head at a Mulholand Drive party hosted by Camilla and Adam to announce and celebrate their marriage. Diane, still in love and obsessed, is invited to the party by Camilla and the two arrive at the event by chauffeured limo. At the party Diane sees Camilla kissing a young girl (Melissa George) and confronted fully with what is going on, is devastated. In a rage at her lover's betrayal and her own humiliation, Diane hires Joe Messing, an incompetent hit man, to murder Camilla. At their meeting in Winkie's restaurant, Joe shows Diane a blue house key, that she will receive as his signal when the hit has been completed. Diane retreats to her dumpy apartment, receives the blue key, and fueled by drugs and alcohol, loses her mind and begins to hallucinate as detectives investigating Camilla's murder arrive at the apartment and bang loudly at the door.The bulk of the film (presented first) is composed of Diane's elaborate dream-fantasy-nightmare-hallucination, in which she re-imagines herself as Betty Elms, a young, innocent and talented version of herself just arrived in LA from Deep River to pursue her acting career. Other individuals she has encountered in LA (including several from Camilla and Adam's party and two strangers seen in Winkie's restaurant) take on new parts in the fantasy.In the fantasy, other names are changed or switched among characters. Camilla becomes Rita (not her real name which she has conveniently forgotten but one borrowed from a Rita Hayworth poster the amnesiac happens to see). Most enigmatically, the unnamed girl kissing Camilla at Adam's party (Melissa George), Camilla's new lover and replacement for Dianne, becomes 'Camilla Rhodes' in the fantasy. The choice of the name fits with Dianne's anger and jealousy at the girl and anger with Camilla, who has dumped her.The film, and the fantasy, begin with Diane's alter ego Betty arriving in LA and encountering 'Rita' = Camilla (Laura Elena Harring), a beautiful amnesiac car accident victim who conveniently has wandered into the apartment where Betty is staying. The imaginary accident site and chauffeured limo are identical to the real site where Diane and Camilla exited the vehicle to take a shortcut to Adam's hillside mansion for the party. Betty helps Rita investigate who she is and, also conveniently, Rita soon adores and falls in love with Betty. In the course of their investigations, Betty and Rita discover a blond female suicide. Diane's fantasy includes some self-serving and gratuitous nudity by Rita (really the object of her obsession, Camilla Rhodes). Also gratuitously, Rita dons a blonde wig and makeup that morph her appearance towards that of Betty's.Related side-plots in Diane's fantasy conform to both her wishful and also her dark view of her world (herself as the hero, confronting a variety of bad people and saving a beautiful damsel in distress): Betty has an audition and performs brilliantly, briefly encounters director Adam Kesher with whom she makes an instant positive connection, mafia types and a menacing cowboy pressure Kesher to cast 'Camilla Rhodes' (not the real Camilla but the unnamed kissing girl from the party) in a part for which she is not qualified - the girl unfairly get's Betty's part. This last element fits with Diane's jealousy over kissing girl's replacing her as the real Camilla Rhodes' lover.In other vignette elements of Diane's fantasy, Joe the hit-man spectacularly and elaborately bungles a job, reflecting Diane's heterophobia, Kesher's spoiled wife Lorraine is having an affair with the pool cleaner Gene and various ugly and disgusting men engage in bad behaviour, and significantly a large stylized blue key appears as an evil sign. Reality intrudes into Diane's dream in the form of the symbolic big blue key, 'Diane' on a waitress's name tag at Winkie's, and most significantly the performance at Club Silencio in which Betty, terrified, is forced to confront reality. At this point Diane wakes up and the film flips to reality (first two paragraphs, above).Finally, the detectives are knocking at the door and Diane, overwhelmed by her situation (madness taking her, her fantasy a fiction, her lover dead, incarceration imminent), kills herself on her bed using a revolver - matching the pose and clothing of the blonde suicide discovered by her imaginary characters Betty and Rita.