Charlie (EDDIE MURPHY) and Phil (JEFF GARLIN) are marketing professionals who work in the health division of a food manufacturer. When their latest product, vegetable-based cereal, flops with their focus group, they and their entire division are laid off. Accordingly, Charlie stays home with young son Ben (KHAMANI GRIFFIN), while wife Kim (REGINA KING) returns to the world of employed lawyers.
With weeks passing and their bank account dwindling, Charlie comes up with an idea of starting a daycare business in their home, particularly since the only other option for nearby parents is the expensive Chapman Academy run by the steely Miss Harridan (ANJELICA HUSTON).
Getting Phil and later their former mailroom co-worker Marvin (STEVE ZAHN) to join them, Charlie starts his center. They soon realize, however, that taking care of a group of kids and dealing with all of the state regulations is more challenging than any of them imagined. Even so, their facility becomes quite popular and begins to siphon off Harridan's clients, prompting her to do whatever it takes to ruin his business.
From that point on, Charlie and his partners must contend with her actions and the various daily challenges of running Daddy Day Care.