The film starts with Siegfried Sassoon's open letter dated July 1917, inveighing "against the political errors and insincerities for which the fighting men are being sacrificed". The letter has been published in The Times and received much attention because Sassoon is considered a hero for acts of valour - and has received the Military Cross, which we see Sassoon throwing away. With the string-pulling and guidance of Robert Graves, a fellow poet and friend, the army sends Sassoon to Craiglockhart War Hospital, a psychiatric facility, rather than court-martialling him. There, Sassoon meets Dr. William Rivers, a Freudian psychiatrist who encourages his patients to express their war memories as therapy. There is no clear main character, but a focus on several: Billy Prior, Siegfried Sassoon and Dr. Rivers himself. A secondary character, Wilfred Owen, is linked to Sassoon’s storyline. Prior, at first an unsympathetic character, presents a challenge to Dr Rivers, who needs to discover what experience caused Prior's dumbness. Prior regains his speech suddenly then looks for female companionship and begins a relationship with Sarah, a munitions worker. He has a strong sense of social class, setting himself apart from the other officers and referring to incidents that caused him to mistrust the authorities. There are references to different treatment for privates and officers, including Craiglockhart itself, which caters for officers. When Prior is ready for hypnosis, he and Rivers discover that his trauma was caused by the death of one of his men, killed by a bomb. Prior lost his speech after picking up the private's eyeball and asked what should be done with "this gobstopper". This surprises Prior who had expected his condition to be caused by something for which he was responsible. He feels he has to return to active duty to prove to himself and others that he is as competent as before. Sassoon becomes friends with another patient, Wilfred Owen. Owen aspires to be a poet and respects Sassoon's work; Sassoon agrees to help with his poetry. Meanwhile, Doctor Rivers takes a leave of absence and visits Dr. Lewis Yealland’s practice in London. Dr. Yealland treats his patients, who are privates, not like traumatised people but machines which need to be repaired quickly. Rivers sits in on an electroshock therapy sessions on a private, who, like Prior, has lost his speech. Rivers is repulsed by the treatments' brutality and continues to produce what Sassoon calls his "gentle miracles" but at the cost of his own mental health, in contrast to Yealland, who lacks empathy but is proud of his success in treating mutism. Sassoon, although he still disagrees with the war's continuation, decides to return to France to care for his men. During the Review Board’s evaluation of Sassoon, Rivers is surprised by Sassoon's insistence that he has not changed his mind. As such, he still meets the previous assessment of mental illness. However, Sassoon did not truly qualify as mentally ill and wishes to return to the war. Rivers qualifies Sassoon as being fit. Sassoon is seen being injured and laughing - to his men's consternation. The extent of the injury is only resolved when Rivers reads a letter from him after the war. In the meantime, Prior goes before the Board and is assigned to home duties, probably because of asthma, which means he cannot be sure whether he is cured. He is last seen in bed with Sarah. The final scenes show Wilfred Owen's body in France after the war and Rivers' sadness on hearing of it. He is seen crying as he reads Owen's "The Parable of the Old Man and the Young" sent by Sassoon. The visual motif of a canal tunnel which has been Owen's dream is now resolved. Unlike other patients' dreams which are the visualisations of the traumatic events causing their breakdowns, Owen's is the premonition of his death.
During the 1997 BAFTA awards, Regeneration was nominated for the Alexander Korda Award for Best British Film but lost to Gary Oldman's Nil by Mouth. During the 1998 British Independent Film Awards, Jonathan Pryce was nominated for Best Performance by a British Actor in an Independent Film, Gillies MacKinnon was also nominated in the Best British Director of an Independent Film category. Because the film was a British-Canadian co-production, Regeneration received various nominations at the Canadian Genie Awards, including Best Achievement in Direction, Best Motion Picture, Best Music Score, Best Performance by an Actor in a Leading Role and Best Screenplay.