In the Dogtown area of Santa Monica/Venice in the mid-1970s, teenagers Tony Alva, Stacy Peralta, and Jay Adams enjoy the life of skating and surfing the pier with board designer Skip Engblom and other locals. One day, Skip is given polyurethane wheels for the skateboards in his shop, Zephyr Surf Shop. Sid, a friend of the boys who works in the same shop, invites Tony, Jay, Stacy, and the other locals to test the new wheels. After witnessing what skaters could now do with the wheels, Skip decides to add Tony, Jay, Sid and others to his Zephyr skate team. The team proves to be a success, winning many contests.
A period of hot weather reduces the surf at the pier and the official declaration of a drought means swimming pools cannot be filled with water. Taking advantage of this, the Z-Boys start sneaking into local backyard pools to skate in, ignoring Skip's practice sessions. After winning many major contests, Stacy, Jay, and Tony start getting noticed by major skating companies looking to take the boys from Skip.
One night at a party, a company owner named Topper Burks convinces Tony that Skip is holding him back and that it is time to make him famous worldwide. Tony accepts his offer and leaves the team. Jay leaves the team as well, looking to make more money to help his mom. Despite Skip's desperate offers to keep him on the team, Stacy is the last to leave, as he begins getting offers to skate and appear on television. Sad and angry, Skip decides to shut down the Zephyr Skate Team.