Stuart "Stu" Shepard (Colin Farrell) is an arrogant New York City publicist who has been courting a woman named Pam (Katie Holmes) behind his wife Kelly (Radha Mitchell). He uses the last remaining public phone booth in the city to contact Pam. During the call, he is interrupted by a pizza delivery man, who attempts to deliver a free pizza to him, but Stu rudely turns him away by insulting his weight. As soon as Stu completes his call to Pam, the phone rings. Stu answers, to find that The Caller, who knows his name, warns him not to leave the booth, and says he will say hello to Pam for him. He also says he will call Kelly, leaving Stu panicked.
The caller tells Stu that he has tested two previous individuals who have done wrong deeds in a similar manner (one was a pedophile, the other was a company insider who cashed out his stock options before the share price collapsed), giving each a chance to reveal the truth to those they wronged, but in both cases, they refused and were killed. To demonstrate the threat, the caller fires a suppressed sniper rifle at a toy robot sold by a nearby vendor; the damage is unseen by anyone but Stu, the caller, and the vendor. The caller demands that Stu confess his feelings for Pam to both Kelly and Pam to avoid being killed. The caller contacts Pam, and puts her on line with Stu, who reveals that he is married. The caller then hangs up, telling Stu to call Kelly himself.
As Stu hesitates, the booth is approached by three prostitutes demanding to use the phone. Stu refuses to leave, having been warned by the caller to stay in the booth and not reveal the situation. Leon (John Enos III), the prostitutes' pimp, joins his charges, smashes the side of the booth, grabs at Stu in a headlock and starts punching him. The caller offers to "make him stop" and asks if Stu can hear him, which Stu just answers positively, causing the caller to misunderstand Stu and shoot Leon. Leon staggers away before collapsing dead in the street. The prostitutes immediately blame Stu, making a scene over Leon's body, accusing him of having a gun as the police and news crews converge on the location.
Police Captain Ed Ramey (Forest Whitaker), already suspecting Stu of being the killer, seals off the streets with police roadblocks and starts trying to negotiate to get him to leave the booth, but Stu refuses, telling the caller that there is no way they can incriminate him; the caller proves him wrong, calling his attention to a handgun that was planted in the roof of the phone booth. Both Kelly and Pam soon arrive on the scene. The caller demands that Stu tell Kelly the truth, which he does. The caller then orders Stu to choose between Kelly and Pam, and the woman he does not choose will be killed.
While on the phone with the caller, Stu secretly uses his cell phone to call Kelly, allowing her to overhear his conversation with the caller. She, in turn, quietly informs Captain Ramey of this. Meanwhile, Stu continues to confess to everyone that his whole life is a lie, to make himself look more important than he really is or even feels. Stu's confession provides sufficient distraction to allow the police to trace the payphone call to a nearby building, and Ramey uses coded messages to inform Stu of this. Stu warns the caller that the police are on the way, and the caller replies that if he is caught, then he will kill Kelly. Panicked, Stu grabs the handgun and leaves the booth, screaming for the sniper to kill him instead of Kelly. The police fire upon Stu, while a smaller force breaks into the room that the caller was tracked to, only to find the gun and a man's corpse.
Stu regains consciousness to find the police fired only rubber bullets at him, stunning but not harming him. Stu and Kelly happily reunite. As the police bring down the body, Stu identifies it as the pizza delivery man from earlier. Stu gets medical treatment at a local ambulance; as he does, a man with a briefcase (Kiefer Sutherland) passes by and says that he regrets killing the pizza deliverer and warns Stu that if his new-found honesty does not last, he will be hearing from him again. The man disappears into the crowd with Stu unable to call out because he has been sedated by the paramedics. As he does, someone else is being called from that same line. The audience could only hear him say, "Hello?" and the film ends.
