In the town of Glenview(The Watch), Ohio, Evan Trautwig (Ben Stiller) is an active participant in the community and the senior manager of the local Costco store. His life is disrupted when the store's night security guard is murdered. The local police have no leads and show no interest in investigating further. Determined to find the killer and bring him to justice, Evan decides to form a Neighborhood Watch. However, he only manages to recruit Bob (Vince Vaughn), a construction worker and loving father, Franklin (Jonah Hill), a high school dropout who dreams of being a police officer but failed the written, physical, and mental health tests, and Jamarcus (Richard Ayoade), a recent divorcee.
The Watch members use the group as an excuse to drink and have fun, much to Evan's annoyance. While driving on patrol they accidentally hit something. On investigation they discover a strange metallic orb that acts as a highly destructive weapon. The group deduces that it is of alien origin. Meanwhile, several more townspeople are mysteriously killed. The Watch responds to the murders and encounters an alien, which attacks them. Evan seemingly kills it with a lawn gnome before the group returns with the creature to Bob's house. The creature regains consciousness and escapes, stealing the metallic orb and warning them that the aliens have already infiltrated the town. The Watch theorizes that the aliens are stealing their victims' skin and disguising themselves as humans, meaning that anybody in Glenview could be an alien. Bob confides to Evan that he is constantly worried about his daughter Chelsea (Erin Moriarty), and does not trust her boyfriend Jason (Nicholas Braun). Evan admits that he has been avoiding his wife Abby (Rosemarie DeWitt) because he is sterile, and afraid that revealing that to her will cause her to leave.
Evan suspects(The Watch) that one of his neighbors is an alien, due to his strange and stiff manner of speaking, and because he always seem to be watching Evan. As the Watch scouts the neighbor's house, Bob learns that Chelsea is attending an unsupervised party with Jason. Bob disobeys Evan's orders and rushes to the party with Franklin. Bob arrives and prevents Jason from raping Chelsea, but is beaten by Jason until Franklin intervenes. Evan and Jamarcus investigate the neighbor alone, but find that he only hosts sex orgies in his basement. When Bob returns, he and Evan get into an argument over him putting his daughter above the Watch. Bob quits the Watch, telling Evan that he has no friends because he attempts to control everything. Evan rushes home and admits his sterility to Abby. Abby accepts this revelation and tells him that they can work it out together. Evan then receives an urgent call from Jamarcus.
In The Watch Jamarcus confesses that he is one of the alien infiltrators, but has decided to side with humanity after experiencing human culture (and oral sex). He warns the group that the aliens are building a transmitter beneath the Costco that will summon their main armada to destroy the Earth. Jamarcus is expelled from the Watch for his deception. Bob, Franklin and Evan arm themselves and infiltrate the Costco to destroy the transmitter. Bob encounters Jason, who is one of the aliens in disguise, and they fight. Evan and Franklin attempt to disable the transmitter but are surrounded by aliens. Jamarcus(The Watch) arrives and saves the pair, revealing that the aliens' brains are located in their crotch. Using this information, Bob is able to kill Jason by ripping off his penis. Evan discovers that the transmitter is powered by the metallic orb and removes it, disabling the machine. More aliens arrive, forcing the group to flee. The Watch uses the metallic orb to destroy the Costco building, killing all of the aliens inside.
In the epilogue, Evan and Abby manage to rekindle the passion in their relationship and adopt a daughter. Bob has grown much closer to Chelsea and accepts her new boyfriend, who is intimidated by the stories of how Bob killed Jason by "ripping his dick off". Franklin is finally accepted into the Glenview Police Department. Jamarcus continues participating in the secret neighborhood orgies. The group maintains the Watch and continues to protect Glenview from both criminals and aliens(The Watch).