Based on the 1979 Scott Spencer novel of the same name, the screenplay was written by Judith Rascoe. The original music score was composed by Jonathan Tunick. Although the novel is set in the summer of 1969, the movie transports the action to the early 1980s. The film also discards the non-chronological structure of the novel and tells all the events in chronological sequence.
Critics compared the film unfavorably to the novel, which showcased the dangers of obsessive love. Despite the poor reviews, its eponymous theme song, performed by Diana Ross and Lionel Richie, became a #1 hit on the Billboard Hot 100. The song spent nine weeks at #1 and received Academy Award and Golden Globe Award nominations for "Best Original Song", along with five Grammy Award nominations.
In suburban Chicago, 15-year-old Jade Butterfield and 17-year-old David Axelrod fall in love after being introduced by Jade's older brother, Keith. The Butterfields' bohemian lifestyle, for which they're well known in their community, allows Jade and David to develop an all-consuming and passionate relationship, including allowing them to have sex in Jade's room. Where her family is open, David's home life is dull; his parents are wealthy political activists who have little interest in his life.
One night, Jade's mother, Ann, sneaks downstairs, catching Jade and David making love by the fireplace. She starts living vicariously through them, but her husband, Hugh, watches them with increasing unease. Jade's nightly trysts begin to negatively impact her grades and her ability to sleep. One morning, she tries to steal a prescription sleeping pill from her father, but he catches her. As a last straw, Hugh demands that David stop seeing Jade until the end of the school year. David is devastated, believing that Hugh wants to destroy their relationship, but Ann calmly assures him that the time apart is for the best and will go by quickly.
Back at school, one of David's friends, Billy, tells him that when he was eight, he tried to burn a pile of newspapers, got scared and put the fire out, and his parents thought he was a hero for saving the house from burning. Inspired by this grim story, David starts a fire on the Butterfields' front porch after their late-night party and walks away. Unfortunately, by the time he returns, the flame has spread too far under the high wind. David immediately evacuates the Butterfields from the burning house before he is subsequently apprehended.
Following the trial, David is convicted of second-degree arson, sentenced to five years' probation, committed into a mental hospital for evaluation and forbidden to go anywhere near Jade or her family again. He continues to write her daily, but the letters are not sent because of the no-contact order. His parents arrange to have him released early from the mental hospital, much to Hugh's chagrin. Meanwhile, David receives his many letters upon his exit, and after realizing why Jade never wrote back, he decides to pursue her, although he knows it is a violation of his parole.
After the loss of their home, the Butterfields have moved from Chicago to Manhattan, where Ann and Hugh file for divorce. David unexpectedly visits Ann at her apartment. At dinner, she admits she has an attraction to David, but he gently refuses her advances. When she is not looking, he thumbs through her address book, finding out where Jade is and discovers that she now attends the University of Vermont in Burlington. Intent on catching a bus to Vermont, David encounters Hugh on the street. Enraged, Hugh starts chasing him and is hit by a car and killed. Hugh's fiancée, Ingrid, arrives on the scene just in time to see David leaving. He comes close to boarding the bus to Vermont but is overcome with grief and returns to Ann's apartment and consoles her. Keith orders David to leave and tells him that Jade hates him while Ingrid, catching a glimpse of David, recognizes him from the accident.
Later, Jade goes to David's hotel room and tells him that they have to leave their relationship in the past and move on with their lives separately. He pulls her back as she tries to leave, throwing her on the bed and holding her down until she admits she still loves him and they stay the night together. The next morning, Jade and David plan to return to Chicago and begin a new life together. Keith and Ingrid arrive at David’s hotel and tell Jade that David is at fault for their father's death. She refuses to believe it at first, but when Ingrid confirms that David was actually at the scene she becomes horrified. David tries to explain, but Keith attacks him, and the two get in a struggle. The police arrive and arrest David for brawling, disturbing the peace and violating his parole.
David is sentenced to five years in a state prison and despairs that he may never see Jade again. At a lakeside, Jade informs her mother that nobody will ever love her as David does, and Ann expresses her understanding and approval. From prison, through his barred cell window, David sees Jade approach the prison to visit him.