Dean Murdock, Rob-Roy Fletcher the owner of the Spotlite Theater chain, purchases an abandoned theater that was once the site of a horrific massacre carried out by the disgruntled owner on the theater's closing night. He notifies his employees of the acquisition and promotes several to renovate and operate the venue. To motivate his crew, he offers a $1,000 bonus to the best performer after a test run, much to the chagrin of his incredulous assistant, Miss Blackwell Mary Woronov.
Two cheerleader friends of Jennifer, Jenny Cunningham, arrive at the abandoned theater to meet her. They find the theater empty, and both are stabbed to death by an unknown man in a tuxedo. During a screening at the main theater, Selena Joanna Foxx, a disgruntled concession stand employee left out of Murdock's promotion, causes a scene and is escorted out by Miss Blackwell.
Meanwhile, Jennifer Jenny Cunningham, Adrian Andrew Cofrin, and Malcolm Daniel Schafer arrive at the theater property and begin cleaning. The three find some old reels of film upstairs, decide to project them. On the reels, they see a filmed stage play, during which the audience flees in terror as the auditorium fills with smoke. The projector catches fire midway through. Jennifer flees, and witnesses a smiling elderly man in a tuxedo who attempts to choke her before disappearing. Jennifer is so frightened by the incident that she refuses to return until the opening night.
Selena Joanna Foxx and Darcy Stephanie Dillard request to be transferred to the theater, which Murdock agrees to. Adrian, while at the theater alone, witnesses a typewriter begin typing by itself; the message reads: > "Don't be hasty. This theater could be yours." Meanwhile, Lisa Lisa Lindsley and Dee-Dee Joni Barnes, two other Spotlite employees dropping off the contents of Jennifer's old locker, are attacked in the auditorium and stabbed to death.
The next day, while Jennifer, Adrian, and Malcolm are in the office, Darcy becomes locked inside the auditorium and is attacked and dragged underneath the stage. The others hear her screams, but upon entering the theater, there is no sight of her. On the theater's opening night, the three await Murdock's arrival, but he is nowhere to be seen. Selena arrives panicked, looking for Darcy, but Adrian sequesters her in a locked room to avoid a scene in front of a local news outfit doing a story on the theater's reopening.
In the projection room, Adrian is attacked by the killer, but fights him off. Malcolm is subsequently electrocuted on the projector, and Adrian is decapitated by a falling window. Locked in the upstairs room, Selena calls Miss Blackwell from a telephone. During the conversation, an invisible force bursts into the room. On the other end, Miss Blackwell hears Selena's screams before the phone receiver inexplicably crumbles in her hands.
Jennifer, who had been waiting outside, enters the theater, and finds herself alone in the auditorium, confronted by the killer—he is the Jonathan Blakely original theater owner who perpetrated the massacre years prior, and he envisions Jennifer as his former lover, an usherette from decades ago. She stabs him to death and phones police from a pay phone outside. Back at the other theater, Murdock belatedly returns from a trip, and Miss Blackwell quits her job.
