The story begins with Marion Crane (Janet Leigh) and her lover, Sam Loomis (John Gavin) who are conducting an illicit affair.

Marion is portrayed as a respectable and moral woman and Loomis is, as such, her male counterpart, possessing the same qualities. Later, at her work place, Marion is entrusted with a large sum of money by her employer. He asks her to deposit it at the bank but in a moment of weakness, Marion takes the money and runs to Fairvale where Sam lives.Though she does her best to be discreet, Marion is a terrible criminal and almost instantaneously draws attention to herself as someone who is in trouble. Almost at Fairvale, she is forced to stop for the night at the Bates Motel as it is raining too hard for her to reach Fairvale that night. The proprietor, Norman Bates (Anthony Perkins), invites her to dinner at his family house on the hill overlooking the motel.

When he leaves to prepare dinner, Marion hears him arguing with his unseen mother, who tells him that she refuses to allow him "bringing in strange young girls for supper".Norman brings sandwiches to the motel to eat there instead. The two proceed to have a conversation over dinner, topics ranging from taxidermy to Norman's mother, who he says has been mentally ill since the death of her lover. When Marion suggests that his mother be institutionalized, he becomes very aggressive, saying he wants to do so but does not want to abandon her. He compares his life to being in a "trap," and observes that everyone is in a similar situation. Marion agrees with him, telling him that she "stepped into a private trap back in Phoenix.

Afterward, Marion returns to her room, where she resolves to return the money.Norman, who has become intrigued with her, watches her undress through a hole in the wall, obscured by a painting. After Marion counts the money, she takes a shower. During the shower, an anonymous female assailant enters the bathroom and stabs her to death. Back at the house, Norman calls out to his mother: "Mother! Oh, God, mother! Blood! Blood! " He runs to the motel, where he finds the corpse; he presumes his mother killed Marion, so he tries to erase all traces of the crime to protect her.He puts Marion's body and all her possessions, including the newspaper in which she had hidden the money, into the trunk of her car and sinks it in a nearby swamp.

Sam is contacted by Marion's sister Lila (Vera Miles) and private detective Milton Arbogast (Martin Balsam), who was hired by Crane's employer to recover the money. Arbogast traces Marion to the motel and questions Norman, who unconvincingly lies that Marion only stayed for one night. Arbogast wants to question Norman's mother, but Norman refuses to give permission, saying that she is ill.Arbogast calls Lila to update her and tells her he will call again after he questions Norman's mother.

Arbogast returns to the house, and proceeds up the staircase. The same assailant who killed Marion emerges from the adjacent room and stabs him to death. Back at Sam's shop, Lila and Sam are puzzled that Arbogast has not returned for three hours, considering he said it would only be an hour. At the house, in an unseen conversation, Norman confronts his mother and urges her to hide in the fruit cellar, saying that more people will come looking for both Marion and Arbogast.

She rejects the idea and orders him out of her room, but against her will Norman carries her down to the cellar. Lila and Sam go visit Deputy Sheriff Al Chambers, who is perplexed to learn that Arbogast saw Norman's mother in the window; he informs them that, 10 years before, Norman's mother had poisoned her lover and then committed suicide. Shocked, Lila and Sam realize that the only way to find out the truth is to go to the motel themselves.Posing as a married couple, Sam and Lila check into the motel and search Marion's room, where they find a scrap of paper stuck in the toilet with "$40,000" written on it.

While Sam distracts Norman, Lila sneaks into the house. Sam suggests to Norman that he killed Marion for the money so he could buy a new motel. Realizing Lila is not around, Norman knocks Sam unconscious and rushes to the house. Lila sees him approaching and hides in the cellar where she discovers a woman sitting in a rocking chair with her back to her.She calls to the old woman—and discovers that it is in fact a mummified corpse. Seconds later, Norman rushes in wearing his mother's clothes and a wig and brandishing a knife.

He tries to attack Lila, but Sam subdues him just in time. After Norman's arrest, a forensic psychiatrist tells Sam and Lila that Norman's dead mother is living in Norman's psyche as an alternate personality. After the death of Norman's father, the pair lived as if they were the only people in the world. When his mother found a lover, Norman went insane with jealousy and murdered them both.Consumed with guilt, Norman "erased the crime" by bringing his mother back to life in his own mind.

He stole her corpse and preserved the body. When he was "Mother", he acted, talked and dressed as she would, and when Norman's own personality felt affection toward another person, such as Marion, the "Mother" side of his mind would become extremely jealous; he killed Marion, Arbogast, and two other missing women as "Mother". The psychiatrist concludes that the "Mother" personality now has complete control of Norman's mind.