As an eight year-old boy, Allen Bauer (Tom Hanks) is vacationing with his family near Cape Cod. While taking a sight-seeing tour on a ferry, he gazes into the ocean and sees something below the surface that fascinates him. Allen jumps into the water, even though he cannot swim. He grasps the hands of a girl who is inexplicably under the water with him and an instant connection forms between the two. Allen is quickly pulled to the surface by the deck hands and the two are separated, though no one else apparently sees the girl. After the ferry moves off, Alan continues to look back at the girl in the water, who cries at their separation. She then dives underwater again, showing her mermaid's tail. Allen comes to believe the encounter was a near-death hallucination, but his bond with the mermaid proves so strong that his subsequent relationships with women invariably fail as he seeks the connection he felt with the mermaid.

Years later, Allen is a co-owner of a wholesale fruit and vegetable business in New York City with his womanizing brother, Freddie (John Candy). Depressed after his latest breakup, Allen returns to Cape Cod, where he briefly encounters eccentric...