The title is inspired by a phrase commonly displayed on VHS rental tapes during the medium's heyday.

In Passaic, New Jersey, the declining "Be Kind Rewind" VHS rental store owned by Mr. Fletcher (Danny Glover) is due to be demolished to make way for high-end development unless he can find the money to renovate his building, despite his claims that jazz pianist Fats Waller was born in that building (Waller was actually born in Harlem on May 21, 1904). Mr. Fletcher leaves on a trip for several days to join friends and memorialize Waller, leaving his only employee, Mike (Mos Def), to tend to the store. Before leaving Mr. Fletcher cautions Mike to keep his paranoid and klutzy friend, Jerry (Jack Black), away from the store. After attempting to sabotage a nearby electrical substation, believing its energy to be melting his brain, Jerry becomes magnetized, and when he enters the store the next day, he inadvertently erases all the VHS tapes in the store (as well as making the camera go out of focus, whenever he walks past it). Mike quickly discovers the disaster, and is further pressed when Miss Falewicz (Mia Farrow), Mr. Fletcher's friend, wants to rent Ghostbusters. To prevent her from reporting a problem to Mr. Fletcher, Mike comes up with an idea: as Miss Falewicz has never seen the movie, he proposes to recreate the film using himself and Jerry as the actors and cheap special effects hoping to fool her. They complete the movie just in time when another customer asks for Rush Hour 2. Mike and Jerry repeat their filming, enlisting the help of Alma (Melonie Diaz), a local woman, for some of the parts.