The Watermelon Woman is structured as a fake documentary about a young African-American lesbian filmmaker who is interested in the "Watermelon Woman," a black actress from the 1930s and 40s. Even though the Watermelon Woman doesn't really exist, the film is semi-autobiographical from writer/director Cheryl Dunye (My Baby's Daddy, Stranger Inside, The New Women). Dunye plays the character of Cheryl as she investigates the fictional actress and works in a video store. The comedic film within a film is actually quite clever.

At the same time, Watermelon Woman also addresses issues of race within the film industry of the past and in the lesbian community of the present. The Watermelon Woman had a relationship with her fictional white female director, before she settled with a black partner for many years until her death. While she is learning this about the actress, Cheryl begins a relationship with Diana (Guinevere Turner, Preaching to the Perverted, Stray Dogs, Go Fish, Chasing Amy, "The L Word," Kiss Me Guido, Hung, Fabulous!, FtF: Female to Femme), who is white. Cheryl's friends don't approve, and one hot love scene later, Cheryl also deals with issues of black lesbian identity.

The film presents a really unique way of storytelling, and it gives voice to issues and people not often seen on the screen.