On November 4, 1979, Iranian activists storm the United States embassy in Tehran in retaliation for President Jimmy Carter giving the Shah asylum in the U.S. during the Iranian Revolution. 60 of the embassy staff are taken as hostages, but six avoid capture and are sheltered in the home of Canadian ambassador Ken Taylor. With the escapees' situation kept secret, the U.S. State Department begins to explore options for exfiltrating them from Iran. Tony Mendez, a U.S. Central Intelligence Agency exfiltration specialist, is brought in for consultation. He criticizes the proposals, but is at a loss when asked for an alternative. While on the phone with his son, he is inspired by watching Battle for the Planet of the Apes and begins plans for creating a cover story for the escapees: that they are Canadian filmmakers who are in Iran scouting exotic locations for a science-fiction film.
Mendez contacts John Chambers, a Hollywood make-up artist who had previously worked for the CIA. Chambers puts Mendez in touch with film producer Lester Siegel. Together, they set up a phony film production company, publicize their plans, and successfully establish the pretense of developing Argo, a "science fantasy adventure" in the style of Star Wars, to lend credibility to the cover story. Meanwhile, the escapees grow restless. The revolutionaries reassemble embassy photographs shredded before the takeover and finally realize that some personnel are unaccounted for.
Posing as a producer for Argo, Mendez enters Iran under the alias Kevin Harkins and meets with the six escapees. He provides them with Canadian passports and fake identities. Although afraid to trust Mendez's scheme, they reluctantly go along, knowing that he is risking his own life too. A scouting visit to the bazaar to maintain their cover story takes a bad turn when they are harassed by a hostile shopkeeper, but their Iranian culture contact hustles them away from the hostile crowd.
Mendez is told that the operation has been cancelled to avoid conflicting with a planned military rescue of the hostages. He pushes ahead anyway, forcing his boss Jack O'Donnell to hastily re-obtain authorization for the mission and confirm their tickets on a Swissair flight. Tensions rise at the airport, where the escapees' ticket reservations are confirmed at the last minute, and the head guard's call to the fake production company in Hollywood is answered only at the last second. The group boards the airliner, which takes off just as the Revolutionary Guards at the airport are informed of the ruse and try to stop them.
To protect the hostages remaining in Tehran from retaliation, all U.S. involvement in the rescue is suppressed and full credit is given to the Canadian government and its ambassador (who shuts down the embassy and leaves Iran with his wife as the operation is underway). The ambassador's Iranian housekeeper, who had known about the Americans and lied to the revolutionaries to protect them, escapes to Iraq. Mendez is awarded the Intelligence Star, but due to the mission's classified nature, he receives the medal in secret and has to return it afterwards. The award is restored to him after the Canadian Caper is declassified in 1997.
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