After Lauren (Lauren Ann Miller) is dumped by her boyfriend Charlie (James Wolk), she is unable to afford a place of her own. Her old friend Jesse (Justin Long) informs her of a beautiful apartment right by Gramercy Park, but does not include the fact that his other friend Katie (Ari Graynor) lives there. During their freshman year of college, Lauren had to drive an inebriated Katie home from a frat party. She accidentally spilled her own urine onto Lauren from an empty slushie container, and was promptly thrown out of the car. Despite their clear disdain for each other, they reluctantly move in together for lack of better options.
One night, Lauren hears strange noises coming from Katie's bedroom. Believing she is being attacked, she opens the door to see Katie is saying sexually explicit things on the phone. Katie explains that her career as a writer does not earn her enough money to live in New York City, so she does some work as a phone sex operator. Lauren is disgusted by her roommate's profession, but makes some suggestions to how she could make more money.
Several weeks go by, and Lauren loses her job at a publishing company when her boss decides to retire. Thinking about the phone sex line, Lauren encourages Katie to obtain a land line, 1-900-mmmhmmm, and becomes her business manager, as they go into business for themselves, which is much more lucrative. In a few weeks they make $12,000, of which Lauren gets one-third of it, which increases when she becomes a phone operator herself. In the process of their venture, they become close friends.
Throughout the film, Katie has been speaking with a repeat customer named Sean and the calls become less about phone sex and more about getting to know one another. They agree to meet, but are accompanied by Lauren and Jesse who are concerned that he may be a rapist. However, after Katie and Sean meet they discover that they are very well suited to each other and begin to start a relationship which leaves Katie feeling distressed as it is revealed that she is a virgin and has been lying for many years to cover up her insecurities.
One day, Lauren gets a job interview at a prestigious publishing company who earlier rejected her, and Katie convinces her to do the interview so that she can blow them off. Yet once Lauren gets to the interview and admits that she has been running a phone sex line all summer, they offer her the job as they feel she has business savvy. Concerned about her long-term prospects, Lauren accepts the job which angers Katie to the point where she reveals their business to Lauren's conservative parents (Mimi Rogers and Don McManus). Lauren moves out and the girls stop speaking to each other.
A few weeks later, Lauren's ex-boyfriend Charlie returns from Italy and declares that he made a mistake in breaking up with her. He reveals that he had a passionate love affair with a fiery Italian woman, but if he is to succeed in his business he needs someone boring, predictable and simple... the same reasons he gave to Lauren for dumping her in the first place. Lauren stands up for herself and leaves Charlie for good.
Meanwhile, Katie and Sean decide to have sex and in order to calm their nerves they talk on the phone while lying next to each other in bed. When they were finished, Katie feels sad that she can't share this news with Lauren, whom she loves. Sean encourages her to call Lauren, and they declare that they 'think' they love each other.
Lauren and Katie both call each other at the same time, and they engage in a phone conversation full of unintentional lesbian-type innuendo before they meet each other on the street and hug.