Hook-handed Vietnam veteran Staff Sergeant John "Four Leaf" Tayback's (Nick Nolte) memoir, Tropic Thunder, is being made into a film. With the exception of newcomer supporting actor Kevin Sandusky (Jay Baruchel), the castâfading action hero Tugg Speedman (Ben Stiller), five-time Academy Award-winning Australian method actor Kirk Lazarus (Robert Downey, Jr.), rapper Alpa Chino (Brandon T. Jackson), and drug-addicted comedian Jeff Portnoy (Jack Black) all behave unreasonably. Rookie director Damien Cockburn (Steve Coogan) cannot control them during filming of a large battle scene, and production is reported to be one month behind schedule a mere week into production. Furious studio executive Les Grossman (Tom Cruise) orders Cockburn to resume filming as planned, or have the project shut down.
Acting on Four Leaf's advice, Damien drops the actors into the middle of the jungle, with hidden cameras and rigged special effects explosions to film "guerrilla-style". The actors have guns that fire blanks, along with a map and scene listing that will lead to a helicopter waiting at the end of the route. Unknown to the actors and production, the group have been dropped in the middle of the Golden Triangle, the home of the heroin-producing Flaming Dragon gang. Just as the group are about to set off, Damien inadvertently steps on an old land mine and is blown up, stunning the actors. Tugg, believing Damien faked his death to encourage the cast to give better performances, persuades the others that Damien is alive, and that they are still shooting the film. Lazarus is unconvinced but joins them in their trek through the jungle.
When Four Leaf and pyrotechnics operator Cody Underwood (Danny McBride) try to locate the dead director, they are captured by Flaming Dragon. Four Leaf is revealed to have hands; he confesses to Underwood that he actually served in the Coast Guard, has never left the United States, and that he wrote his "memoir" as a tribute. As the actors continue through the jungle, Kirk and Kevin discover that Tugg is leading them in the wrong direction. The four actors, tired of walking and hoping to be rescued, leave Tugg, who goes off by himself and is captured by Flaming Dragon. Taken to their heroin factory, Tugg believes it is a POW camp from the script. The gang discovers he is the star of their favorite film, the box office bomb Simple Jack, and forces him to reenact it several times a day.
Meanwhile in Los Angeles, Tugg's agent Rick 'Pecker' Peck (Matthew McConaughey) is trying to negotiate with Les an unfulfilled term in Tugg's contract that entitles him to a TiVo. Flaming Dragon calls the two and demands a ransom for Tugg, but Les instead berates the gang. Despite the threats, Les expresses no interest in rescuing Tugg and tries to convince Rick about the benefits of allowing Tugg to die and collecting the insurance. Les also offers Rick a Gulfstream V jet and money in return for his cooperation.
Kirk, Alpa, Jeff, and Kevin discover Flaming Dragon's heroin factory. After witnessing Tugg being tortured, they plan a rescue attempt based on the film's script. Kirk impersonates a farmer towing a captured Jeff on the back of a water buffalo, distracting the armed guards so Alpa and Kevin can locate the captives, but after the gang's leader (Brandon Soo Hoo) notices inconsistencies in Kirk's story, the actors, knowing their cover has been blown, begin firing, temporarily subduing the gang. Their control of the gang falls apart when Jeff grabs the leader and heads for the drugs, and the gang regains their guns and begin firing.
The four actors locate Four Leaf, Cody, and Tugg and cross a bridge rigged to explode to get to Underwood's helicopter. Tugg asks to remain behind with the gang which he considers his family, but quickly returns when Flaming Dragon fires in pursuit. Four Leaf detonates the bridge allowing Tugg to reach safety, but as the helicopter takes off, the gang fires a rocket-propelled grenade at the helicopter. Rick unexpectedly stumbles out of the jungle carrying a TiVo box and throws it in the path of the grenade, saving them. The crew return to Hollywood, where footage from the hidden cameras is compiled into a feature film, Tropic Blunder, which becomes a major critical and commercial success. The film wins Tugg his first Academy Award, which Kirk presents to him at the ceremony.
In a mid-credits scene, Rick is on a plane back to Hollywood with his estranged son. Also during the credits, you see Tom Cruise dancing by himself listening to Ludacris's "Get Back".

Question: Why does Tugg think Damien faked his death?
Answer: So the other actors will perform better.
Alternative answer: To get the cast to perform better.