In Núpur, a chef from Reykjavík is hired to throw a party in the middle of winter at a summer hotel and an old boarding school. All information is scarce, but he realizes when he arrives at Núpur that he is alone there, at least for the first time. The film is based on the stories and experiences of former students from the boarding school in Núpur. Everyone who has stayed at Núpur knows Númur, but Númur is a former student of the school who took his own life while staying there almost 100 years ago. Ever since then, he has had a habit of pranking those who stay at Núpur.

Set in present-day Reykjavík, Fiasco draws a narrative circle of interconnecting stories in which three members of the Bardal household deal with the secret loves in their lives. Karl, an old age pensioner, is busy chasing after an amnesic old screen legend. Julia, Karl's granddaughter, is torn between a mediocre bank manager and a wild sailor, and tells them both she is pregnant. But is she really? Steingerdur, Julia's mother, has a wild crush on a preacher who has a serious drinking problem, and ends up with a dead stripper in his Jacuzzi. The characters cross each other as the film progresses, until the three interwoven strands of the story finally come together in an explosive and hilarious crescendo full of surprises.