Ignácio (Jack Black) is a young orphan boy dreaming of becoming the world's greatest luchador (Spanish wrestler) and decides to test his fighting skills in a monastary graveyard. He is discovered by monks and is taken to be cleansed and made into the orphanage chef. This does not bode well for young Ignácio, but he does his duty and continues to do so even after fifteen years, although not entirely successfully..
As an adult, Ignácio still dreams of becoming the ultimate luchador, but has been taught that wrestling is a sin. To make matters worse, he meets his soul mate, a nun, Sister Encarnación (Ana de la Reguera) who has been hired as the orphans' teacher. He is smitten with her, but knows the relationship will never work for they both have take an oath of celibacy. Nevertheless, he goes to speak with her and invites her to have toast with him in his quarters, but is interrupted by the lead monk (Eduardo Gómez) who tells him to visit a man sick with influenza. Ignácio reluctantly obeys.
Upon arriving at the man's house, Ignácio meets the man's wife, but sees that the man is apparently dead. He begins to give a eulogy, but as he does so, the man awakes from a deep sleep. This terrifies Ignácio and he leaves to take care of other duties. As he travels through the village on his trademark chariot (a motorized chariot-like shopping cart), he stops at a local eatery to pick up the free chips that the restaurant's owner leaves each day for the orphans. He is unexpectedly attacked by an extremely skinny street urchin (Hector Jiménez), who steals the chips and leaves Ignácio bruised and disgraced.
That night, on the way back to the orphanage, Ignácio witnesses a luchador, the great Ramses (Cesar Gonzalez), being adored and worshipped by his many fans. Ignácio finds out that a tag-team tournament will be offered to new luchadors, and this grabs the attention of our dismayed hero.
Ignácio and Encarnacion later enjoy toast in Ignácio's quarters and he sheds some light on his past. He then goes on to tell Encarnacion of his feelings about the monastary, and tells her of the luchador he encountered in the village. She tells him that luchadors are false idols, and to be patient, for his passion to fight should soon pass away.
The next day, the monks complain about the missing chips. Ignácio tries to explain the situation, but his efforts fall on deaf ears. Angered, Ignácio leaves the monastary and heads to the village with a handful of leftover chips. He throws them into the alleyway where he was previously attacked. He waits behind a wall for the homeless assailant to pounce. He almost succeeds in sneaking up on him, but gives himself away when he breaks wind.
He tackles the man and they begin to fight. During the fight, Ignácio asks the man if he would join him in the tournament. At first, Steven, the homeless man, ignores the proposition, but after hearing that there is a grand prize of two hundred pesos, he decides to team up with Ignácio. They make two makeshift luchador uniforms out of stolen items, train themselves with unusual methods, and then enter into the tournament.
Ignácio and Steven now go by the names Nacho and Esqueleto (Nacho is a nickname for Ignácio; Esqueleto means "skeleton" in Spanish which suits malnourished Steven perfectly), and face their first two opponents, El Semental (Ignácio Camarena) and El Pony (Carlos Barroso). Esqueleto is struck down by El Semental, but Nacho gives El Pony a run for his money. At one point, it seems that Nacho and Esqueleto are nearing victory, until Nacho is knocked unconcious by El Semental.
Although they failed to win the tournament, Nacho and Esqueleto are given a well-portioned consolation prize. Nacho spends his part of the winnings on better food for the orphans' meals, and begins to draw out plans for a new uniform, a baby-blue and red one. Luckily, Steven has a knowledge of sewing and helps Ignácio create their new outfits. Chancho (Darius Rose), an orphan child, catches Nacho trying on his outfit in the monastary, but promises to never tell a soul.
As Nacho and Esqueleto prepare for their next fight, Nacho hassles Esqueleto about his beliefs in science, and not in the Lord. He unofficially baptizes him, and then they head on to the fight. This time, they are pitted against two midget wrestlers known as Satan's Cavemen (Agustin Rey and Ricardo Castillo). Although they are small, they prove worthy adversaries for our heroes, and after a struggle they defeat Nacho and Esqueleto. Once again, however, the duo are paid a hefty consolation prize.
This time they spend their cash polishing up their physical appearances. Ignácio buys new clothes and boots, and Steven gets a pedicure and a charicature. Ignácio tells Steven about his feelings for Encarnacion, and Steven concocts a plan. He proposes that Nacho should take Encarnacion on a date, and that he would show up with some of his hobo buddies to beat Nacho up, but that they would let him win. Ignácio likes the sound of this idea.
That night, Ignácio takes Encarnacion out, by telling her that he wants both of them to minister to a bum he claims he saw previously. Once they get there, Nacho says a few cheesy lines, but then notices two gentlemen walking down the street. Thinking that they are Steven's friends, he challenges them to a fight. They ignore him, but he runs up to the two men and rips one of the mens' jackets. They turn and face Ignácio, but he is already in his fighting position. However, he hears Steven's voice far off and sees him with his real hobo friends. This distracts Nacho, giving the two men enough time to sucker-punch Ignácio, knocking him unconscious.
The next day, Nacho is humiliated and expresses his anger at Steven for being late. Steven feels bad for Ignácio, and tells him about a secret water gypsy who uses magical eagle eggs to grant peoples' desires. Nacho sees this as an opportunity to gain power as a luchador and the two embark on a journey to see the gypsy. When they arrive, they sail over to a cliff in the water where an eagle's nest is precariously perched. The gypsy tells Nacho to climb the cliff and to eat one of the eggs, and that this will give him the strength he needs. Ignácio makes the strenuous and difficult climb to the cliff's peak, and cracks open an egg and swallows the yolk inside. He then dives off the cliff into the sea below.
Contrary to the gypsy's promises, Nacho and Esqueleto's next fights against the luchadors Paradise (Albert Madrid), Sage (Lauro Chartrand), and many others prove disastrous. Nacho feels that he was lied to and tells Esqueleto that they need to go pro if they wish to advance in their wrestling careers. He makes a plan to go to a party being thrown by Senor Ramon (Enrique Munoz), the best manager in wrestling.
The next day, Ignácio takes the orphans on a field trip to see the village. He humorously gives insight into the town's various locales, and then he and the orphans see Ramses and other luchadors leaving the gym. The orphans ask Nacho to get Ramses's autograph, but after trying to persuade the wrestler for his signature, Ramses gets annoyed and shoves Nacho into a melon cart. Nacho then gives up trying.
That night, after Steven once again sews new outfits for himself and Ignácio to wear to the party, Ignácio tells Encarnacion not to worry about getting the orphans food, but that he would do this himself. Nacho and Esqueleto then head to the party. After failing to get past the party's bouncers, Ignácio boosts Steven over a wall so that he can get in. Although Steven cannot lift Nacho, he is able to sneak in by pretending to be a member of the hired mariachi band. Steven strikes up a conversation with Senor Ramon, who who tells him about an upcoming tournament known as the Battle Jam. The winnner of this competition receives eight hundred pesos, and is given a chance to fight against the current champion, Ramses. Steven accidentally attracts the attention of Ramon's plus-sized daughter, Candidia (Carla Jimenez), and she is instantly love-struck.
Meanwhile, Ignácio tries his best to pretend to play the bass guitar with the band. Steven goes upstairs to relax and finds Candidia's extensive doll collection. He accidentally breaks one of the dolls, but is surprised to find Candidia sitting right next to him in the room. She instantly forgives him. Naturally, Steven asks how she got upstairs so fast. Her reply is that she installed secret tunnels throughout the house. Obviously freaked out, Esqueleto makes a mad dash to leave, but Candidia travels down her secret tunnel.
At the same time, Ignácio is asked to sing a song, so he makes one up right on the spot. However, his composition doesn't go over well, and Ramses shows his disapproval by pouring out his wine on Nacho's shirt. Screams can be heard over the crowd though, and Nacho goes over to see what the matter is. He finds that Candidia is trying to pull Steven into her secret tunnel, and tries to help by slamming her with his bass. He misses, and accidentally hits Steven. The two are then kicked out of the party.
As they travel back to the chariot, they see two rival luchadors, whom Nacho and Esqueleto almost beat, slashing their tires. They engage them, but keep their disatance because their foes have knives. Steven uses an ear of corn he had been munching on as a projectile, and lands it in his foe's eye socket. The duo push the cart back to the orphanage, and then Nacho remembers that he forgot to the get the groceries. It's too late to go back however, because it is now approaching daybreak, so he takes his anger out on Steven. He blames him for his shortcomings and Esqueleto replies by saying that he hates all the orphans in the world.
Later that day, Ignácio attends mass and prays for forgivness and that God would bless him in battle so that he could win money for the orpans. He goes to light a candle at the altar, but accidentally sets his robes on fire. The congregation sees the luchador outfit Nacho was wearing underneath his robes, and soon realizes what he has been doing. Nacho tells the monks and Encarnacion about his plan to win the Battle Jam and give his winnings to the orphans for all of their needs. He leaves the orphanage to go to the Battle Jam, where he must fight several fighters all at once. The fighters include Silencio (Donald Chambers), El Snowflake (Craig Williams), Dynasty (Brett Chan), El Chino (Mike Ching), Muneco (Abelardo Hernandez), Carlos Rosales (Emiliano Quiroga), and his trusty companion, Esqueleto. Dynasty, El Snowflake, Muneco, and Carlos Rosales are defeated in the beginning, and Silencio takes out El Chino and Esqueleto at the same time.
Nacho approaches Silencio but for some odd reason, Muneco trips Nacho from outside of the ring causing Nacho to fall in front of Silencio. Silencio picks Nacho up and then drops him, once again knocking our hero unconcious, also once again leaving him defeated. Nacho sullenly returns to the orphanage and decides to give up wrestling and spend the rest of his days in the wilderness. Chancho gives Nacho his lucky machete (his mother gave it to him before she died) and then Nacho heads into the wilderness.
Ignacio creates a makeshift shelter and lives off of cactus water. The next day, however, Steven drives into the wilderness on the chariot and tries to persuade Nacho to come back to wrestling. As it turns out, it was easy for him to find Nacho because although he thought he was in the wilderness, Nacho was really right next to a small village. Esqueleto tells him that Silencio cannot fight Ramses because he got injured (which is humorously shown in a clip where Esqueleto runs over Silencio's foot with the chariot after Silencio was mean to a poor orphan child) and that Nacho gets to fight Ramses because he came in second place. Nacho is reluctant at first, but agrees to fight him.
Ignácio writes a letter to Encarnacion which Steven delivers, which tells her of his love for her and of the fight he will be in against Ramses. While in the locker room, Nacho sings a very comical song to Esqueleto which he wrote for Encarnacion, but he is interrupted by an arena worker who tells him that the fight will now begin. Nacho goes into the ring and the battle against Ramses commences.
Although there are many close calls, Nacho makes it to the second round. Ramses ignores the bell and begins an all-out street fight against Nacho. Ramses seems to have Nacho pinned until Encarnacion enters the arena with the orphans. The sight of his lover gives Nacho the strength to fight back, and he eventually flings Ramses out of the ring. Nacho then climbs up one of the corner pillars of the ring and dive-bombs towards Ramses. It is here that the eagle powers finally kick in and give Nacho the needed air time to reach Ramses and put him into an unbreakable submission. Against all odds, Nacho comes out victorious and is declared the luchador champion.
A week later, Nacho takes Encarnacion, Steven, and the orphans on a field trip to see the Mayan pyramids of Chichen Itza in a newly-purchased bus and closes out this movie with a somewhat disturbing smile.