Elliot Wade [Sam Bottoms] obtains ownership of the Dolly Dearest factory in Mexico, where a darker world starts to unfurl. Not far from the dusty corridors and creaking machines lies the underground Mayan tomb of Sanzia, described as Satan on Earth, and an archaeologist breaks into the sarcophagus, unintentionally releasing the spirit of the ancient devil child Sanzia, who dies in the attempt. Sanzia then takes refuge in the porcelain doll Dolly Dearest [Ed Gale].
The Wade family travels south to inspect their new home, meeting their realtor, Estrella [Enrique Renaldo], and the housekeeper Camilla [Lupe Ontiveros]. The factory, long abandoned, sits in a state of disrepair and trembles under the weight of neglect, unsettling Elliot. [Jessica Wade] Candace Hutson discovers a shelf full of undisturbed dolls, and her father allows her to choose one: Dolly Dearest [Ed Gale]. Jimmy Wade [Chris Demetral] soon finds the entrance to a cave, though his father warns him to stay away from it.
The next day, Marilyn Wade [Denise Crosby] notices a disturbing drawing that she suspects Jessica created. As Jessica becomes increasingly violent and fixated on Dolly Dearest, she behaves normally when her father is present but turns cold and dangerous around her mother. Camilla grows wary that the doll itself is exerting control over Jessica, and when Jessica speaks in a Sanzian tongue, Camilla tries to warn Marilyn but is killed by the spirit. That night, Jimmy sneaks out and enters the factory again, discovering the night watchman Luis dead and fleeing in fear.
Marilyn begins to fear that her daughter is truly possessed and moves to retrieve the doll. Sanzia momentarily possesses Jessica and lunges with a threat: > I will kill you! The kid's mine. < In the following day, Marilyn discusses the situation with archaeologist Resnick [Rip Torn], who explains their dig aims to uncover the remains of the Sanzia devil child inside the tomb—the creature described as a being that feeds on the warm blood of children. Marilyn reveals that Jessica is being manipulated by the doll.
At home, Marilyn finds Jimmy hiding and learns that he saw Dolly speak and move. She arms herself with a shotgun and tells Jimmy to call his father. Back at the factory, the dolls seem to disable the phones, cutting the family off from outside help. When Jessica becomes separated from Dolly, Marilyn attempts to flee with her daughter, only to be blocked by Dolly herself. Dolly calls to Jessica, who then attacks her mother as Dolly advances with a kitchen knife. Jimmy fires the shotgun at Dolly, breaking the doll’s hold over Jessica.
Marilyn, Jessica, and Jimmy race to the factory where Elliot is under assault from the dolls. Meanwhile, Resnick enters the tomb and discovers the remains of the devil child—a small infant body with the head of a goat—solidifying the myth's truth in his mind. He rushes to the factory to warn everyone and ends up saving Elliot from the relentless dolls. The family is finally reunited, and they plant dynamite around the factory. The blast destroys the building and traps the dolls inside, accompanied by a chilling demonic scream that suggests Sanzia has been vanquished. The family watches the blazing ruin burn down, a grim farewell to the malevolent force that once stalked their new home.
