In 1995, Jimmy Smith Jr. is an aspiring rapper who performs under the stage name “B-Rabbit”. A blue-collar worker, Jimmy has moved to the run-down Detroit trailer home of his alcoholic mother, Stephanie, after breaking up with his pregnant girlfriend Janeane. He also lives with his younger sister Lily, and Stephanie’s abusive live-in boyfriend, Greg, who is later revealed to be a former schoolmate of Jimmy’s as well as his friend David Porter, another aspiring rapper who performs under the stage name “Future”. Although encouraged by his friends, Jimmy worries about his potential as a rapper. One night, Jimmy develops stage fright during a rap battle at a local venue, the Shelter, hosted by Future, and he leaves the stage humiliated.

During the day, Jimmy works at a car factory. Desperate for money, he asks for extra shifts, but his supervisor bluntly dismisses his request because of his habitual tardiness. Later on, he befriends a woman named Alex and begins to take more responsibility for the direction of his life. Stephanie discovers an eviction notice as Jimmy is getting ready for work, deciding not to reveal it to Greg because he has a large settlement check from an accident coming in, which she hopes will buy her and Lily a new house.

Jimmy’s friendship with fellow trailer park resident Wink, who has ties to a record label promoter, becomes strained after he discovers that Wink does promotional work for Jimmy’s rivals, a rap group known as “Leaders of the Free World” who Jimmy had lost the prior rap battle to. At one point, Jimmy and his friends get into a violent brawl with the Free World crew, which is disrupted when Jimmy’s friend, Cheddar Bob, threatens them with a gun and accidentally shoots himself in the crotch; he survives after being rushed to the hospital.

During a lunch break at work, one of Jimmy’s co-workers performs a freestyle rap insulting his co-worker, Paul, insinuating Paul is gay as well as insulting some of the other workers. Jimmy raps a freestyle defending Paul, and the positive reception from Jimmy’s coworkers boosts his confidence. Alex arrives, impressed by Jimmy’s talent, and they have sex.

Despite her best attempts to keep the eviction notice a secret, Greg discovers it and confronts Stephanie. When Jimmy punches Greg for pushing his mother to the ground, they get into a fight, ending in Greg leaving Stephanie for good. After Jimmy finds Stephanie lying on the porch, intoxicated, and brings her inside, the two get into an argument over Jimmy’s actions, ending with Stephanie furiously kicking Jimmy out of the trailer.

Wink arranges for Jimmy to meet with producers at a recording studio, but Jimmy finds Wink and Alex having sex. Enraged, Jimmy attacks Wink as Alex tries to stop it. In retaliation, Wink and the Leaders of the Free World bully and assault Jimmy outside his trailer. The leader of the gang, Papa Doc, holds Jimmy at gunpoint and threatens to kill him, but Wink convinces him not to do it. After the group has left Jimmy alone, his mother arrives with enough money to pay to avoid eviction, having won $3,200 at a bingo tournament, and the two reconcile.

Future encourages Jimmy to get revenge by competing against the Leaders of the Free World at the next rap battle. Jimmy agrees, but his boss, having noticed his improved efforts at work, asks Jimmy to work a late-night shift. Jimmy agrees, but it conflicts with the battle at the Shelter. Alex unexpectedly visits Jimmy at work. She says goodbye, as she is going to New York, and she is hoping to see Jimmy at the Shelter later. This motivates Jimmy to do the battle. He asks Paul to cover the start of his shift as a favor while Jimmy goes to the battle.

In all rounds of the battle, Jimmy has to compete against one member of the Free World crew. After handily winning the first two rounds against Lyckety-Splyt and Lotto, he faces Papa Doc. Going first, Jimmy pre-empts Papa Doc’s potential insults, acknowledging his own “white trash” roots and difficult life as well as the events of the film involving his prior loss, Cheddar Bob, Wink and Alex. He also refutes his opponent’s image as a thug by revealing that Papa Doc (whose real name is Clarence) grew up in a wealthy suburb, attended private school, and still lives at home with his stable, happily married parents. Embarrassed and with nothing to say in rebuttal, Papa Doc hands the microphone back to Future, conceding the battle.

After being congratulated by Alex and his friends, Jimmy is offered a position by Future to co-host battles at the Shelter. Jimmy declines, saying that hosting is Future’s thing, and he needs to do his own, and leaves to return to work.