Woody Allen blurs the the boundaries between the real and unreal in this unique comic fantasy. The scene is a small town in the mid-1930s. Trapped in a dead-end job and an abusive marriage, Cecelia (Mia Farrow) regularly seeks refuge in the local movie house.
She becomes so enraptured by the latest attraction, an RKO screwball comedy called The Purple Rose of Cairo, that she returns to the theatre day after day. During one of these visits, the film's main character Tom Baxter (Jeff Daniels), pauses in his dialogue, turns towards the audience, and says to Cecelia, My God, how you must love this picture.
Then he climbs out of the movie, much to the consternation of the rest of the audience and the other characters on screen. Liberated from his customary black-and-white environs, he accompanies Cecelia on a tour of the town, eventually falling in love with her.
Meanwhile, the other Purple Rose characters, unable to proceed with the film, carry on a discussion with themselves. Desperately, the RKO executives seek out Gil Shepherd, the actor who played the hero of Purple Rose. Shepherd (also played by Daniels), is sent to Cecelia's hometown to see if he can repair the damage.