Plot

1920s

David "Noodles" Aaronson struggles to survive as a poor street kid in the Jewish ghetto on the Lower East Side of Manhattan, in the early 1920s. His gang consists of Patrick "Patsy" Goldberg, Phillip "Cockeye" Stein, and little Dominic. They work for Bugsy, a local hood, until they meet Max Bercovicz and become an independent operation under his and Noodles' leadership. Noodles has a fruitless flirtation with Deborah Gelly (Jennifer Connelly), who aspires to be a dancer and actress. Bugsy attacks the boys and Dominic is shot fatally. Noodles retaliates by stabbing Bugsy to death with a switchblade. Police officers intervene, and Noodles stabs one of them. He is sent to prison, and Max is left in charge on the outside.

1930s

Ten years later, Noodles (now played by Robert De Niro) is released from jail in 1932 and becomes reacquainted with his old gang: Max (James Woods), Patsy (James Hayden) and Cockeye (William Forsythe), who are now major players in thebootlegging industry during Prohibition. After briefly reuniting with other acquaintances such as Deborah (now played by Elizabeth McGovern), her brother Fat Moe (Larry Rapp), who runs the speakeasy, and Peggy (Amy Ryder), the gang is recruited by a Detroit mobster, Joe (Burt Young), through the auspices of a local mobster, Frankie Manoldi (Joe Pesci) to steal a shipment of diamonds from an insurance dealer. Carol (Tuesday Weld), the jeweler's secretary, is in on the job and goads Noodles into "raping" her (with her complicity) during the robbery. During an exchange at an abandoned dockyard, Joe and his henchmen are gunned down in a surprise hit by the gang; Frankie Manoldi had arranged the hit to eliminate the competition from Detroit. Leaving the scene, Noodles argues that Max said nothing to him about killing the mobsters, reminding him that they never planned to work for anybody. This is the first sign of the rift between Noodles and Max, which is one of the two themes of the story: the second being Noodles' doomed relationship with Deborah.

The gang becomes involved in Mafia matters, getting into a steel workers' strike on the side of unionist Jimmy Conway O'Donnell (Treat Williams), protecting him against a steel tycoon's thugs. The crew also deals with the corrupt Police Chief (Danny Aiello) by switching the identity of the Chief's newborn son in the maternity ward. Carol becomes reacquainted with the gang and falls for Max. Noodles tries to impress Deborah on an extravagant date, but he is left feeling rejected when she tells him she is leaving the following night for the West Coast where she plans to further her acting career. He rapes her in the back seat of a limousine, and after Deborah leaves, he is left regretting what he has done.

Max is eager to advance his gang's position, despite Noodles' objections. After Prohibition is repealed, Max suggests that they rob the Federal Reserve Bank, but Noodles sees it as suicidal. He is convinced by Carol to tip off the police about a planned liquor run to keep Max from pulling the bank heist. During a farewell party for Fat Moe's speakeasy, he makes an anonymous phone call to the authorities and is beaten by Max after calling his plans "crazy." Later, Noodles learns that Max, Patsy, and Cockeye are all killed in a gunfight after getting cornered by the police. He is consumed with guilt for having made the phone call.

Noodles' new girlfriend Eve (Darlanne Fluegel) is murdered by the Syndicate, and Fat Moe is beaten nearly to death before revealing the traitor's whereabouts. After hiding out in an opium den, Noodles escapes his pursuers. Having retrieved the key to the locker, he makes his way to the gang's money hoard. Noodles is shocked to discover that the money is missing, and he flees to Buffalo, where he lives for decades under an assumed name.

1968

In 1968, a gray-haired and world-weary Noodles returns to New York City where he goes to stay with Fat Moe at his Diner. Noodles shows Moe a letter he received from the local rabbi notifying him that the cemetery where his three friends were buried has been sold for development. The letter offers relatives and friends of the deceased the opportunity to have their remains interred elsewhere. Moe tells Noodles that he got a similar letter on account of his father some eight months previously. Noodles explains that the late delivery of the letter, coupled with the fact that the bodies of Max, Patsy and Cockeye have long since been removed to an exclusive private cemetery, is the reason why he has come back out of hiding. Fat Moe asks: "What's this all mean?" Noodles answers: "It means, 'Noodles, though you've been hiding in the asshole of the world, we found you. We know where you are.' It means, 'Get ready.'"

At the mausoleum where his friends have been reburied, Noodles discovers a key hanging on a plaque dedicating the monument to them in his name. It is similar to the one he and his childhood friends shared for the train station locker they used as an informal bank throughout their career as mobsters. When he goes to the station, he finds the locker contains a suitcase full of cash and a note to the effect that it is advance payment on his next job. Noodles goes to see an elderly Carol who is living or working at an institution run by the Bailey Foundation. The establishment looks like a hospital or a home for the aged. Carol tells Noodles that Max triggered his own death as well as the killing of Patsy and Cockeye by opening fire at the police that night. As they talk, Noodles inspects a group photograph from the opening day of the institution where an older Deborah can be seen very clearly sitting, pride of place, in the centre of the front row. Carol is not sure who she is, referring to her as a famous actress and the patron saint of the institution.

Noodles visits Deborah in her dressing room where she is taking off her make-up following a performance of Antony and Cleopatra. Deborah becomes agitated as Noodles begins to question her about the politically embattled Secretary Bailey who featured, obliquely, in a sequence of televised news reports earlier. Noodles is impatient as Deborah recites a few details known to just about anyone who reads the papers, challenging her that she has been living with him for years. Noodles mentions he has an invitation to 'a party on Long Island' on Saturday night, although it is never clear exactly where or when that invitation was issued. Deborah advises him not to go, becoming frantic when they are interrupted by a knock on the dressing room door. The voice of a young man calls her by name. She asks him to wait, begging Noodles to leave by the back door, to go and not look back. Noodles defies her, choosing to leave the way he came in and is shocked to be confronted by a young man bearing a striking resemblance to Max at the same age. Deborah introduces him as Secretary Bailey's son: "His name is David, just like yours."

Noodles' final visit is his attendance at Secretary Bailey's party where Secretary Bailey turns out to be none other than Max himself. He is now under investigation for corruption and decides to settle an old debt by hiring Noodles to assassinate him. Upon meeting his old friend after more than thirty years, Noodles learns that the planned liquor raid was a Syndicate operation, but he politely refuses to kill 'Bailey' despite Max's confession that he betrayed him, stole the money and even 'stole' his woman. Before leaving, he tells Max that his betrayal was meant to save his life. Max follows him to the road, and as an industrial garbage disposal truck parked there starts up and begins to slowly move down the road, Max appears to follow it and as his feet disappear behind the tires, we hear additional noises coming from the truck (the feet then reappear briefly running with the truck). As the truck passes, Max has disappeared, and in the back of the truck are sharp one foot radius screws designed to move trash or debris into the top of the truck, leaving Max's fate somewhat ambiguous, but implying that he threw himself into the truck to be torn apart by the screws.

1933

Noodles goes to an opium den following the loss of his friends. As he settles into his dream, his expression appears to shift from glazed relaxation through a faint glimmer of realisation before cracking into a final, broad grin which is frozen for the end titles.