Liberace has sex with Cary. That and Scott's drug use cause them to break up. Two years later, Liberace dies of AIDS.
In 1977, Scott Thorson (Matt Damon) is an animal trainer for Hollywood productions. He and his new friend Bob (Scott Bakula) travel to Las Vegas to take in a show by Bob's mutual friend Liberace (Michael Douglas). Scott meets Liberace, or Lee as he prefers to be called, at a backstage meet-and-greet, and it's at this point that Scott, who is bisexual, learns that Lee is gay. In that era, if a celebrity is revealed to be gay, his career is ruined, so Lee puts on an act that he is living a bachelor lifestyle. His handlers, primarily his agent Seymour (Dan Aykroyd), also do whatever it takes to keep the truth away from the media.
Backstage, Lee takes an immediate liking to Scott, and he invites Scott and Bob back to his house for brunch the next day. While Lee gives Scott a tour of the house, Scott mentions that he is trying to become a veterinarian, and Lee decides to hire him to take care of his numerous dogs. Scott agrees and moves into Lee's house a short time later, much to the chagrin of Lee's houseboy Carlucci. In no time, Scott and Lee become lovers, and this angers Carlucci. He warns Scott that he is Lee's favorite now, but one day Lee will tire of him and move on to someone else, because Carlucci was once in Scott's position. Later, Lee fires Carlucci and Seymour pays him off to go away.
Lee showers Scott with gifts, including clothes, cars, and jewelry, and also hires Scott to be part of his Las Vegas show by driving him onto stage before each performance. One day, Lee asks his friend Dr. Jack Startz (Rob Lowe) to perform some plastic surgery on himself, as well as some on Scott to make him look more like Lee physically. Jack then prescribes several pills for Scott for weight loss and later painkillers from the surgery. Meanwhile, Lee and Scott's relationship evolves to the point that Lee begins to seriously consider legally adopting Scott to make sure he is taken care of after Lee dies.
As time goes on, however, Lee and Scott's relationship begins to show signs of strain. Lee and Scott don't go out anymore, and Lee sees Scott's behavior changing due to his growing addiction to Dr. Jack's pills. Lee is also asking Scott to do different things sexually, but he finds them repugnant. Because of that, Lee is beginning to show interest in other young men, and this causes Scott to take more drugs to numb the pain, including cocaine. When Lee starts to show interest in a young man named Cary, and treats him the same way he once treated Scott, this causes Scott to go on a drug binge. He also realizes that Carlucci's earlier warning about Lee was correct.
When Scott returns home following the funeral of a close family member, he learns that Lee and Cary had sex. Scott loses it and begins to trash the house. Lee then breaks up with Scott and throws him out. Lee, through his lawyers and Seymour, pays off Scott to go away. Two years later, Scott, now clean and working at a copy store, gets a call out of the blue from Lee. He has been diagnosed with AIDS, and only has a short time left. Scott has been tested and his results are negative. He visits Lee, and he tells Scott that he is the one who made him the happiest. The next day, he dies. Even though Seymour and his handlers tell the world Liberace died of heart failure, the county coroner reveals that he actually died of AIDS.