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In a hotel called the Bodega Bay Inn, an aging puppeteer Andre Toulon is putting the finishing touches on a living puppet called Jester. The owner of the Hotel, Neil Gallagher then enters Toulon’s room with a bottle of scotch; he pours two drinks for them both and unknown to Toulon laces one of the glasses with powdered Arsenic. After drinking the scotch, Toulon dies of the poisoning and Gallagher takes possession of all his belongings.
The film now cuts to a few years later, when a psychic named Alex Whitaker has a dream of a man that he doesn’t recognize speaks to him of the Bodega Bay Inn. Seconds later, he wakes up and finds that he had fallen asleep in his wheelchair and that he was running late for his lecture at the local college. The film then cuts to Sue and Frank Forrester, two other psychics who are Niece and Uncle, who are testing their powers of detection when they get an Email from Alex who then invites them and two other psychics to Bodega Bay.
Alex then hosts a meeting at the Bodega Bay Inn that Neil and his wife, Megan own and meets Sue and Frank, as well Ian Wayne and, Carissa Stamford. The psychics are skeptical that Alex had invited them to the middle of nowhere, however Alex explains that he had received visions detailing of a resident at the hotel who apparently discovered the secret of life and thus the other psychics decide to stay. Settling into his room, Ian warns Megan to stay away from the third floor after accidently touching her shoulder. Megan, somewhat upset and suspicious of Ian, leaves the room. Alex, in his room, finds a picture and has a vision of a couple dancing in the ballroom, only to awaken from his vision with the now crumpled picture in his hand. Wondering what to make of his dream, he decides to talk to Ian who then receives a vision that Alex will be covered in blood after touching his forehead. Ian then leaves the room in a panic, unaware that he was being watched by someone very small.
When night falls, Megan goes to the third floor to look over empty rooms and is murdered when someone throws a poisoned shuriken into her back. The psychics hear a scream and run to the third floor only to find Sue screaming because she saw a rat, however there is no sign of Megan’s body. Later Carissa and Frank decide to take a walk on the beach so that they could talk but upon her return to her room Carissa finds two more living puppets, Tunneler and Pinhead on her bed. At first she thinks it’s a joke being played by one of the other psychics, however Tunneler suddenly jumps of the bed and drills into her ankle causing her to collapse, giving Pinhead the opportunity to beat her to a pulp and finish her off with a claw-hammer. Meanwhile, Frank sits around Playing cards with Sue until they are attacked by two more living puppets, Six Shooter and Blade. Sue runs from the room but Frank is not so lucky as Six-Shooter managed to shoot him six times in the chest, causing him to fall out the open window. Sue runs to find the other psychics but only finds the dead body of Carissa in her room before having her leg cut by blade.
Meanwhile one floor down, Alex has recurring nightmares of Andre Toulon having a gun put to his head by Neil and the other psychics being found dead, but is eventually awoken by Ian, who takes him into the room that Andre Toulon used to live in, and tells him that he found Andre's journal detailing the secret to bringing inanimate objects, such as puppets, to life. They go to the other rooms to find the other psychics, but only find empty rooms. They then go downstairs only to find the dead bodies of the other psychics and Megan sitting around a table. They are about to phone the police only to be stopped by Neil who is holding a knife to Sue’s throat. He explains that when Andre Toulon first came to his hotel, he became close friends with him. However after discovering his puppets coming to life, he decided to steal the secret of life for himself and used Toulon's formula to give himself eternal life.
When Neil finishes his story, Sue bites his hand causing him to let go of her so she could run to Ian and Alex, they try to escape only to be stopped by two more living puppets Torch and Ninja. Corning them by the door, Neil explains that he had the puppets kill the other psychics because them being here made it difficult to keep his secret, even his wife “became too nosey for her own good.” He then says that because of his new immortally, it would take the complete destruction of his body in order for him to die and that he had no more use for the puppets and then hurts Jester. Seeing this attack on one of their own and learning the truth about their fallen creator, the puppets revolt against Neil with Blade taking the lead.
Pinhead locks him in an elevator, and Neil starts to attack him, forcing him to get out of his way. Neil throws Pinhead to a wall and then bangs on the elevator door trying to get out. After escaping to the second floor, Six-Shooter fires his guns and manages to hit Neil in the arm. Tunneler then drills into Neil's leg, and Neil pulls him off. He then limps and climbs up the staircase, trying to get free. Ninja then shows up and throws a shuriken into his back causing him to collapse. When Neil manages to pick himself up, he finds himself surrounded by all seven puppets, Jester then spins his head to show a sinister face and Blade instructs torch into setting Neil on fire, causing him to fall out an open window and die.
Alex, Ian and Sue then leave the Hotel in a state of panic, leaving the puppets alone in the hotel. The film then ends with the puppets looking up at a photo of Toulon and bowing in respect.
- Blade: The leader of the puppets. With a hook for his left hand and a razor-sharp knife for his right, he kills his victims by slicing their throats
- Pinhead: The main muscle of the puppets. Despite his tiny head, he can use his giant hands to deliver a massive punch to his victims and break their bones.
- Jester: The smartest of the puppets who has the ability to rotate three portions of his face: his forehead, middle face, and chin. He can show five expressions: happy, devious, sad, angry or surprised (which also doubles as scared).
- Tuneller: The Drill Sergeant. His namesake and main weapon is a cone-shaped power drill replacing his scalp; he usually kills his victims by charging them head-on with his "drill running."
- Torch: The most sadistic of the puppets. With a blowtorch for his right hand, he takes great pleasure in burning his victims alive.
- Six Shooter: The Badass Cowboy with six arms, each carrying a small pistol which he uses to fill his victims full of lead.
- Ninja: The stealthiest of the puppet. With his variety of ninja weapons, he kills his victims without them even knowing here was there.
- Alex Whitaker (Patrick Stewart): The main Protagonist. Once a wheelchair-bound Proffesor of Physics in a well known college who receives visions in his dreams, he later hears rumours of an aging puppeteer who discvoered the secret of life. He then gathers a team of fellow phycics who share his interest. He is one of the few who manage to escape the hotel alive.
- Megan Gallagher (Courtney Cox): Wife of Neil Gallagher. When Alex Whitaker and his team of phycics arive at the hotel, she is the first to meet her end when Ninja throws a poisoned shruiken into her back.
- Neil Gallagher (Robert Englund): The Main Antagonist and the sadistic owner of the Bodega Bay Inn. After learning of Andre Toulon's secret of life, he steals Toulon's puppets and the secret that gives them life in order to make himself immortal. When Alex Whitaker and his team of phycics arrive at the hotel, he sends the puppets to kill anyone who gets to close in discovering what he was up to. He later meets his end when he looses control over the puppets and they all revolt against him.
- Carissa Stamford (Vanessa Angel): One of Alex Whitaker's team of phycics who can touch an object and give the object's history. She meets her end when Tunneler drills into her ankle and Pinhead finishes her off by hitting her over the head with a claw-hammer.
- Frank Forrester (David Tennant): Uncle of Sue Forrester. One of Alex Whitaker's team of phycics who can locate anyone by touching one of their possessions. He later dies when Six Shooter shoots him six times in the chest, causing him to fall out the window.
- Sue Forrester (Emma Watson): Neice of Frank Forrester. Like her uncle, she can locate anyone by touching one their possessions. She is one of the few that escape the hotel alive.
- Ian Wanye (Orlando Jones): One of Alex Whitaker's team of phycics who can see visions of a person's future when he touches them. He is one of the few that escape the hotel alive.
- Andre Toulon (Ian McShane): the creator of the puppets and the secret that gives them life. After Neil Gallagher learns of his secret of life, he kills Toulon earlier in the film and gains control over his puppets. During the film, Toulon's ghost would appear in Alex Whitaker's dreams to warn him of the upciming danger.