There's a man... in back of this place. He's the one who's doing it. I can see him
through the wall. I can see his face. I hope that I never see that face, ever, outside
of a dream.
The story may not be linear, and exhibits several instances of temporal disorder. A dark-haired woman escapes her own murder when she is the sole survivor of a car accident on Mulholland DriveInjured, she descends into LA and sneaks into an apartment which has just been vacated by an older woman with red hair. An aspiring actress named Betty Elms arrives from Ontario and takes a taxi to the apartment, where she finds the dark-haired woman confused, not knowing her own name. The dark-haired woman assumes the name "Rita" when she sees a poster for the film Gilda (1946), starring Rita Hayworth. Betty decides to assist her in discovering her identity, and they look in Rita's purse where they find a large amount of money and an unusual blue key.
A man in a diner called "Winkies" tells his companion about a nightmare in which he dreamt there was a horrible figure behind the diner. When they go to investigate, the figure appears, causing the man with the nightmare to collapse in fright. Later, a bungling hit man attempts to steal a book full of phone numbers and leaves three people dead. A Hollywood director named Adam Kesher has his film commandeered by apparent mobsters, who insist he cast an unknown actress named Camilla Rhodes as the lead in his film. After he resists, he returns home to find his wife having an affair and is thrown out of his house. He later learns that his bank has closed his line of credit and he is broke. He agrees to meet a mysterious figure called The Cowboy, who urges him to cast Camilla Rhodes for his own good.
Betty and Rita try to learn more about her accident and Rita remembers the name "Diane Selwyn" after they are served by a waitress named Diane in Winkies. They call Diane Selwyn after finding her in the phone book, but she does not answer. Betty goes to an audition, where her performance is highly praised. A casting agent takes her to the set of a film called The Sylvia North Story, directed by Adam, where Camilla Rhodes gives an audition and Adam declares "This is the girl." Saying that she needs to meet a friend, Betty flees before she can meet Adam.
Betty and Rita go to Diane Selwyn's apartment, and break in when no one answers the door. In the bedroom they find the body of a woman who has been dead for several days. Terrified, they return to their apartment, where Rita disguises herself with a blonde wig. The two women make love that night and fall asleep until 2 a.m., when Rita insists they go to an eerie theater called Club Silencio. A performer explains in several languages that everything is an illusion; a woman performs a song, then collapses, although the song plays on. Betty finds a blue box in her purse that matches Rita's key. Upon returning to the apartment to open the box, Betty disappears, and Rita unlocks the box and it falls to the floor with a thump.
The woman with the red hair investigates the sound, but nothing is there. The Cowboy appears in the doorway of Diane Selwyn's bedroom saying, "Hey, pretty girl. Time to wake up". Diane Selwyn (played by Naomi Watts) wakes up in her bed. She looks exactly like Betty, but she is portrayed as a lonely and depressed failed actress, in love with Camilla Rhodes (played now by Laura Elena Harring), who torments and rejects her. On Camilla's invitation, Diane attends a party at Adam's house on Mulholland Drive. Her limousine stops before they reach the house and Camilla escorts her using a shortcut. Adam, who is a successful director, also appears to be in love with Camilla. Over dinner, Diane states that she came to Hollywood when her aunt died, and she met Camilla at an audition for The Sylvia North Story. Another woman (played by Melissa George) kisses Camilla and both smile at Diane. Adam and Camilla attempt to make an important announcement, but dissolve into laughter and kisses while Diane watches, crying.
Diane meets with the bungling hit man at Winkies, where she gives him Camilla's photo and a large amount of money, and they are served by a waitress named Betty. The hit man tells Diane that when the job is done, she will find a blue key. Diane looks up to see the man who had the nightmare standing at the counter. Back at her apartment, in view of the key, she is terrorized by hallucinations. She runs screaming to her bed where she shoots herself.
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