As he attempts to open the fibrous husk of a tropical coconut, Ratso dreams of relocating and scoring in Miami. The friendship of the two unlikely companions is tested as they fling insults at each other, even though both of them fulfill each other's emotional needs. Ratso insists that Joe's cowboy apparel is more attractive to homosexuals than to women, while Joe suggests that his crippled partner hasn't ever scored with women. Once hustled by Ratso, Joe won't ever let him forget how he was swindled. Although Joe has confidence in his beauty, he is unable to succeed in the big city without the assistance of a real hustler - they pair up again in a pathetic client/managerial partnership:

Ratso: I gotta get outta here, gotta get outta here. Miami Beach, that's where you could score. Anybody can score there, even you. In New York, no rich lady with any class at all buys that cowboy crap anymore. They're laughin' at you on the street.
Joe: Ain't nobody laughin' at me on the street.
Ratso: Behind your back, I've seen 'em laughin' at you, fella.
Joe: Aw, what the hell you know about women anyway? When's the last time you scored, boy?
Ratso: That's a matter I only talk about at confession. We're not talkin' about me now.
Joe: And when's the last time you've been to confession?
Ratso: It's between me and my confessor. And I'll tell ya another thing. Frankly, you're beginning to smell. And for a stud in New York, that's a handicap.
Joe: Well, don't talk to me about clean. I ain't never seen you change your underwear once the whole time I've been here in New York. And that's pretty peculiar behavior.
Ratso: I don't have to do that kind of thing in public. I ain't got no need to expose myself.
Joe (cruelly): No, I bet you don't. I bet you ain't never even been laid! How about that? And you're gonna tell me what appeals to women!
Ratso: I know enough to know that that great big, dumb cowboy crap of yours don't appeal to nobody except every jockey on 42nd Street. That's faggot stuff! You wanna call it by its name? That's strictly for fags!
Joe: John Wayne! You wanna tell me he's a fag? (after a long pause) I like the way I look. It makes me feel good. It does. And women like me, god-dammit. Hell, only one thing I've ever been good for is lovin'. Women go crazy for me. That's a really true fact. Ratso, hell: Crazy Annie, they had to send her away.
Ratso: Then how come you ain't scored once, the whole time you've been in New York?
Joe: 'Cause, 'cause I need management, god-dammit. 'Cause you stole twenty dollars offa me. That's why you're gonna stop crappin' around about Florida. And, and get your skinny butt movin.' And earn twenty dollars worth of management which you owe me.

[To disprove the claim that cowboys are fags, Joe cites John Wayne in a paradoxically ironic comment - this was the same year when the celebrated western actor finally won a long-overdue Oscar as Best Actor after 30 years of superb performances, winning over the Best Actor nominations of both Hoffman and Voight for Midnight Cowboy.]

Ratso craftily becomes Joe's pimp or stud manager, sprucing and grooming him up so that he can begin to successfully ply his trade. He takes him to a laundromat to clean his clothes, outfits him with a cowboy hat, shines his boots (and attracts other customers to the shoeshine stand), and gives him a haircut.

With a cigarette butt dangling from his lips, Ratso shares memories of his father and his dream of not ending up like his hunch-backed father in abject poverty and respiratory illness as a degraded shoe-shiner. His father's whole life was bent over shining other people's shoes:

End up a hunchback like my old man? If you think I'm crippled, you should have caught him at the end of the day. My old man spent fourteen hours a day down in that subway. He come home at night, two to three hours worth of change stained with shoe polish. Stupid bastard coughed his lungs out from breathin' in that wax all day. Even a faggot undertaker couldn't get his nails clean. They had to bury him with gloves on.

When the transformation of the 'midnight cowboy' is complete, Ratso stands back and admires a spruced and primed-up Joe as a "handsome devil" - ready to work Times Square as a stud:

Not bad, not bad for a cowboy. You're OK. You're OK.

A well-dressed gentleman departing The Perfect Gentleman Escort Service has just arranged a date with Miss Beecham ("one high class chick" according to Ratso). Ratso cleverly pickpockets the address of the woman from the man and substitutes Joe as the evening's stud - set for the Berkley Hotel for Women on Fifth Avenue. As he vicariously watches Joe enter the lobby of the hotel from across the street (although he is dressed like a bum), Ratso daydreams of the good life and his important station in life in Florida - sunning, sprinting with Joe on the beach without a limp, having his shoes shined on a terrace above a luxury hotel's swimming pool, being pampered, gambling with rich dowager women, being admired by women from balconies, and sampling a gourmet spread. But when Joe improperly propositions a woman in the lobby, Ratso's dream deteriorates - their money-making scheme fails. He tumbles backwards into the fantasy swimming pool and Joe is thrown out of the hotel.

Winter approaches, the weather turns cold, and Ratso's hacking cough worsens. Desperate for funds, they hock Joe's portable radio for five dollars. Joe donates his blood for money, bragging to Ratso: "There you go boy, there's money for ya, that's nine dollars right there plus assorted change, minus 26 cents for milk, plus 5 cents for Dentyne - gum." Ratso assumes he solicited someone, probably a homosexual: "Where you been, 42nd Street? That's where you've been." Joe wants his friend to buy medicine for himself instead of smoking cigarette butts: "Buy yourself some medicine before you die in my damn hands." From across the street, they watch their condemned building being razed, and they walk through the cold climate under grey skies, passing a billboard advertising: "Steak for everybody every lunch and dinner. Northeast Yellowbirds to Florida."

Together, they visit the cemetery and grave of Ratso's father, his tombstone inscribed with: "Our Beloved Father, Dominic Salvatore Rizzo, 1886 - 1959." Shamed, Ratso describes that his father was illiterate: "He was even dumber than you (Joe). He couldn't even write his own name. X - that's what it ought to say on that god-damn headstone. One big lousy X. Just like our dump. Condemned by order of City Hall." Joe shares his own misfortune about his grandmother Sally Buck: "She died without lettin' me know."

In a short-order diner, they both speculate about "spiritual matters" ("priest-talk" according to Joe) and whether one can come back in another body after death. Joe has had some foundation of religious belief bred into him, but Ratso has lost all semblance of faith: "Maybe you gotta think about those things for a while. Well, I don't believe in any of that crap. I mean, you're entitled to think what you want."

A "couple of fruity wackos" (Gastone Rossilli and Viva) who are underground film-makers take Joe's picture and, as a "come-on," invite him to a 'happening'. The event is a party in Greenwich Village at "Broadway and Harmony Lane, Hansel and Gretel McAlbertson, one flight up." The freaky invitation pictures a devil, and the words: "Join Us At The Gates of Hell, If You Dare, Flesh, Blood & Smoke Will Be Served After Midnight." Joe assures Ratso that they will stick together, begrudgingly remaining faithful to his sick pal: "I'll just tell 'em, you want me, I don't go nowhere without my buddy here." As they climb the stairs to the event, Joe wipes the sweat from the head of his ailing friend, to make him more presentable. At the ultra-hip, Warholesque psychedelic party, an out-of-place Ratso sizes up the "wacko" hosts: "You want the word on that brother and sister act. Hansel's a fag, and Gretel's got the hots for herself so who cares, right?"

After smoking his first joint with the self-conscious, marijuana smoking crowd and tripping out, Joe attracts the attention of a rich, also-stoned socialite named Shirley (Brenda Vaccaro), who is quite willing to pay $20 for his services and take him home - she is his first successful score:

Ratso: She's hooked.
Shirley: Like why, cowboy?
Ratso: I'd say she was good for ten bucks, but I'll ask for twenty.
Shirley: Why cowboy whore? Did you know we were gonna make it?
Ratso: So, uh, do you really want to do business?
Shirley: Who is he? (referring to Ratso) Don't tell me you two are a couple!
Gretel: Why are you laughing, Joe? Are you really a cowboy?
Joe: Well, I'll tell you the truth now. I ain't a real cowboy, but I am one helluva stud.
Ratso: A very expensive stud. And I happen to be his manager.
Shirley: Incidentally, how much is this gonna cost me?
Ratso: Twenty bucks.
Shirley: OK.
Ratso: And taxi fare for me.
Shirley: Oh, get lost, will ya?
Ratso: I agree, but for that service, I charge one buck taxi fare.

Ratso cannot admit, even after falling down the entire flight of stairs as he leaves the party, that he is hurt.

Joe performs unsuccessfully as a gigolo at the woman's apartment. She suggests playing scribbage (a combination of scrabble and a dice game) to take his mind off his sexual inadequacy:

Shirley: Maybe if you didn't call me ma'am, things might work out better.
Joe: That's the first god-damned time this thing ever quit on me. (He lights his cigarette.) It's a fact. You think I'm lyin' to ya?
Shirley: No, no, I don't think you're lyin'. I just had this funny image. I had this image of a, um, policeman without his stick, and a, uh, bugler without his horn, etcetera, etcetera, etcetera. (pause) Well, I think I'm making it worse. Maybe we ought to take a little nap and see what happens.
Joe: I ain't sleepy.
Shirley: Oh! I know, scribbage.

During the spelling game, Joe's letters spell a crossword composed of the words MAN, MONY (the initials of the Mutual of New York Building across from his hotel, not Money), and Shirley laughs and suggests words that end in Y: "Like, uh, say, hay, lay, hay, hey, lay, hmmm...gay ends in y. Hmmm? Do you like that?...Gay, fey. Is that your problem, baby?" Angry with her that she has suggested that he is gay, he proves his masculinity to her. His love-making is spurred on by anger, not passion or loving desire. The next morning, Shirley phones Marjorie, one of her unhappily married friends, recommends his services, and sets him up for his next appointment.

Encouraged and delighted by his luck and the way things are going, Joe purchases (on his way back to their flat) some socks and cough medicine ("swill" with mentholatum and aspirin) for Ratso. He is jubilant about his success as a hustler: "We ain't gonna have to steal no more, that's what I'm tryin' to tell ya. I've got eight bucks in my damn pockets, twenty more come Thursday, boy. We're gonna be ridin' easy before very long, I'm gonna tell ya." He brags about his sexual conquest: "She went crazy if you want to know the damn truth of it...She turned into a damn alley cat."

Joe finds that Ratso is deathly ill with pneumonia and realizes that he must take care for his pathetic, ailing, feverish, and permanently-crippled friend, who fears the end is near: "I don't think I can walk anymore. I've been fallin' down a lot. I'm scared...You know what they do to ya when, when they know you can't, when they find out that you can't walk-walk. Oh Christ." Rejecting treatment by a doctor, Ratso begs for a bus trip to Florida where he can regain his health:

Ratso: You ain't gettin' me no doctor. Nope.
Joe: When you're sick, boy, you need a damn doctor.
Ratso: Hey, no doctors, no cops. Don't be so stupid.
Joe: Well, what the hell you want me to do?
Ratso: Florida. You get me to Florida.
Joe: Oh hell, I can't go to Florida now.
Ratso: Just put me on a bus. Just put me on a bus. I don't need you.
Joe: You got the damn fever, boy. How the hell you gonna get to Florida?
Ratso: Just get me on a bus. You ain't sendin' me to Bellevue...Boy, you're really dumb. I don't need you...Dumb cowboy, boy.
Joe: Dammit. Shut up. Aw, just when things go right for me, you gotta pull a damn stunt like this.

Joe tries to get in touch with Shirley by phone, but she is unavailable. At an arcade where he frustratingly fires a toy gun at a target, Joe accepts the advances of another homosexual - a middle-aged Catholic man named Towny (Barnard Hughes), in town for a paper manufacturer's convention. Back at the man's hotel room, in the last sordid act of his street-life existence, things turn violent. Joe ends up in a rage, brutally attacking the self-loathing, mother-dominated, despicable man after receiving a St. Christopher's medal and only ten dollars. He commits a horrible crime - he robs the man of all his money - needed for taxi fare to the bus station and bus fare to the paradise of Florida - and then brutalizes the customer. He jams the phone receiver into the man's bloody, toothless mouth.

In the final sequence, Joe frantically drags Ratso to a bus to Florida [intercut within the previous scene], using the last of their money to pay the bus fare and help realize Ratso's dream. To the end, Ratso wants to maintain his dignity and insists on being called "En(Rico)" in Florida:

Ratso: I've been thinkin'. I hope we're not gonna have a lot of trouble about my name down there. Because, I mean, like what's the whole point of this trip anyway, you know?
Joe: Keep your blankets on you.
Ratso: Can you see this guy runnin' around the beach all sun-tanned, and he's goin' in swimmin' like, and somebody yells 'Hey, Ratso!' What's that sound like to you?
Joe: It sounds like I knew ya.
Ratso: It sounds like crap, admit it. I'm Rico all the time, OK? (Joe nods silently) We're gonna tell all these new people my name's Rico. OK?
Joe: OK.

On the Florida-bound bus on the way to his dream, Ratso wets his pants and his body is wracked with pain:

Ratso: Here I am goin' to Florida, my leg hurts, my butt hurts, my chest hurts, my face hurts, and like that ain't enough, I gotta pee all over myself. (Joe chuckles) That's funny? I'm fallin' apart here.
Joe: (consoling him with a cheerful joke) ...You just took a little rest stop that wasn't on the schedule.

During an extended rest stop in northern Florida, Joe buys new warm weather clothes for the two of them, and symbolically discards his own 'midnight cowboy' costume/gear in a trash container. As they approach the environs of Miami, he has dressed Ratso in a new, more comfortable flowery shirt, telling him: "Yours was the only one left with a palm tree on it. The clothes are damn cheap here too, you know that?" Joe ponders the way things will be once they get into Miami, thinking of more mature, realistic and positive opportunities for work. His faith has been restored - the major result of his deep friendship with Ratso - and for the first time in the film, he abandons the name Ratso and calls his friend Rico:

Everything we got only set us back ten and some... Hey you know, Ratso. (Correcting himself) Rico, I mean. I got this damn thing all figured out. When we get to Miami, what we'll do is get some sort of job, you know. Cause hell, I ain't no kind of hustler. I mean, there must be an easier way of makin' a living than that. Some sort of outdoors work. What do ya think? Yeah, that's what I'll do. OK Rico? Rico? Rico? Hey, Rico? Rico?

His rhetorical affirmations for his future fall on deaf ears. As palm trees and views of endless beaches pass by the window, Joe realizes that his best buddy has passed away - Rico is finally at peace without any more pain. [Both Joe's naive dream of life in New York and Rico's dream of paradise in Miami are ultimately unrealized and unfulfilled.] When Joe informs the driver about Rico, the bus driver (Al Stetson) pulls over, walks to the back of the bus, asks Joe to close Rico's eyes, and reassures the other passengers:

Okay, folks, everything's all right. Nothing to worry about...Okay folks, nothin' to worry about. Just a little illness. We'll be in Miami in just a few minutes.

Joe, with tears forming in his eyes, affectionately wraps his arm around Rico's shoulder and holds him. He must now face life alone without the aid of his pal to guide him through, but he has learned his limitations and true potential from his friend.