Film students Heather Donahue, Michael Williams and Joshua Leonard go missing in October 1994 while making a documentary about the Blair Witch, a legendary creature believed to haunt the woods near Burkittsville, Maryland. They disappear soon after, and their bodies are never found. A year later, the footage the students shot has been recovered, and the film in its entirety is composed of fragments of that footage.

Shot in a mixture of color and black and white, with shaky handheld camera movements and only natural lighting, the footage includes material that was intended to be used in the documentary, but the bulk of the film shows the experience of the three students as they wander through the woods. Occasionally, the view switches out to a kind of "mood footage" (footage of no characters, just video of the environment) while the audio track continues.

Soon after setting out, they become hopelessly lost; their situation worsens when Michael, in frustration, kicks their only map of the area into the river without telling the others. Over a period of several days, a number of terrifying, mysterious, and possibly supernatural events occur. In one scene, the crew hikes for more than half of the day only to end up in the same spot where they had started.

Much of the plot is open to the viewer's interpretation, including the finale; few concrete indications are given as to the eventual fate of the three filmmakers.

Detailed summary
Film student Heather sets out to produce a documentary about the fabled Blair Witch, accompanied by fellow students Josh and Mike. They travel to Burkittsville (formerly Blair), Maryland and interview locals about the legend of the Blair Witch. Two locals tell them of a hermit named Rustin Parr who kidnapped eight children in his house in the woods in 1940. Parr brought the children into his basement in pairs and murdered one while the other faced the corner. He would then kill the other. They also interview Mary Brown, an eccentric older woman who tells them that she had an encounter with the Blair Witch as a young girl. Heather notes Mary’s odd house gate made of woven sticks and branches.

The next day, the students begin to explore the woods near Burkittsville to look for evidence of the Blair Witch. Along the way, a fisherman warns them that the woods are haunted. The students hike to Coffin Rock, where five men were found ritually murdered in the nineteenth century, and then camp for the night. The next day they move deeper into the woods, despite being uncertain of their exact location on the map. They eventually locate what appears to be an old cemetery with seven small cairns. They set up camp nearby and then return to the cemetery after dark. One of them accidentally disturbs one of the cairns, and Heather hastily repairs it. Later, they hear strange cracking sounds in the darkness, but cannot locate the source.

Heather's oft-imitated taped apology.The next day they attempt to return to their vehicle, but fail to find it before darkness falls, and they are forced to set camp. That night, they again hear cracking noises, but cannot see anything. The next morning they find that three small cairns have been built around their tent during the night. As they continue to try to find their way out of the woods, Heather realizes that her map is missing, and Mike reveals that he kicked it into a creek out of frustration the previous day. They realize that they are now thoroughly lost, and decide to simply head south. Soon they discover a set of humanoid stick figures made of woven sticks and branches suspended from trees. That night, they hear more strange noises, including the sounds of children, and unknown entities brush against the sides of their tent. They flee their tent in panic and hide in the dark woods until dawn. Upon returning to their tent, they find that their possessions have been rifled-through, and Josh’s equipment is covered with slime. As the day wears on, they realize that they are completely disoriented and going in circles, and set camp.

The next morning, Josh has disappeared. After trying in vain to find Josh, Mike and Heather eventually break camp and slowly move on. That night, they hear Josh’s screams in the darkness, but cannot find him. The next morning, Heather finds a bundle of sticks and fabric outside their tent. Later inspection reveals it to contain blood-soaked scraps of clothing and what appear to be human teeth, but she does not mention this to Mike. That night, they hear Josh’s cries for help and follow them to a ruined house in the woods. Mike races down into the basement and after what seems to be a struggle, goes silent and drops his camera to the floor. Heather then enters the basement and sees Mike facing a corner. Then Heather drops her camera, and her screams suddenly fall silent.