The story opens with the Zoot Suit Riots of 1943 and depicts a young Latino couple, Esperanza and Pedro Santana, being racially targeted by sailors.

Years later, in 1959, the Santana family's teenaged son, Montoya, forms a street gang called La Primera along with his friends J.D.

Santana begins a romantic relationship with a woman named Julie, but she becomes repulsed by his violent tendencies and by La Eme's negative influence on their community.

However, following a precedent set by Santana himself earlier in the film, his men—including Mundo—murder him to show the other prison gangs that La Eme is not weak and will not tolerate departures from its ranks.

Julie gives the necklace to Santana's teen brother Paulito, who then inducts a young boy into the street gang, La Primera by having him commit a drive-by shooting.

[1] Roger Ebert of the Chicago Sun-Times liked the reality that came through in the film and that it rang true: "What I felt watching American Me, however, is that it is based on a true situation—on the reality that street gangs and prison, mixed with the drug sales that finance the process, work together to create a professional criminal class.

"[6] Janet Maslin writes in The New York Times, "But Mr. Olmos's direction...is dark, slow and solemn, so much so that it diverts energy from the film's fundamental frankness.

"[7] Marjorie Baumgarten, a film critic for The Austin Chronicle, wrote, "American Me is crafted with heart and conviction and intelligence.

[12] Segments of the Mexican Mafia were enraged by the film, specifically the lead character's rape as a juvenile and his death at the hands of his own followers at the end of his criminal career.

Whether as retaliation over their depiction in the film, or as a routine criminal racket, Mexican Mafia member Joe "Pegleg" Morgan, who served as the inspiration for the character of J.D.,[4] allegedly attempted to extort money from Olmos.

According to reportage by CBS News weekly 60 Minutes, three consultants on this film were later murdered because of the depiction of a homosexual rape scene which offended the Mexican Mafia gangsters' machismo.

Another consultant to the film, 49-year-old grandmother Ana Lizarraga, commonly known as "The Gang Lady", was murdered when she was gunned down in her East Los Angeles driveway while loading luggage into her car the day of her mother's funeral.