As Malcolm Graves, the mysterious head of a hidden satanic coven, gets ready to offer his own son in a grotesque rite, his mother Anastasia steps in, placing a mystical talisman around her grandson Jonathan's neck. The dark ceremony continues as Wolfgang is tasked with taking the young boy away, only for Malcolm to choose a different victim instead. Fast forward twenty-five years, and an adult Jonathan, along with his girlfriend Rebecca, inherits the eerie mansion left by his father, Malcolm. Upon moving in, they come across an array of ancient texts and a secret underground chamber filled with occult relics. In a bid to liven up their social life, they decide to throw a lavish party.
As the evening unfolds, Jonathan's curiosity about the dark arts resurfaces, prompting him to involve his friends in a ritual he claims is for entertainment. However, the event spirals out of control, leading to the emergence of sinister creatures known as Ghoulies. Jonathan's growing fascination with these mischievous spirits drives him to forsake daily life, while Rebecca becomes increasingly alarmed by his detachment and erratic behavior. Despite his reassurances of change, Jonathan slips back into darkness, calling upon two mischievous minions—Grizzel and Greedigut—to assist him.
Rebecca's concerns escalate to panic when she finds Jonathan in the lair, clad in a soaked robe as he seeks to uncover the truth about his parents, though his true motives remain unclear. During a vulnerable moment, she unknowingly dooms herself by removing the protective talisman, making her susceptible to Jonathan's manipulation. Now empowered, Jonathan draws his friends into a hazardous ritual that aims to unveil the secrets of the dark world.
As the time approaches for their grim ceremony, Rebecca finds herself ensnared in deception and control, compelled to join Jonathan and their friends in chanting ominous spells. Unbeknownst to them, this very act is meant to bring about Malcolm's return, heralding a descent into a nightmare that threatens to engulf them all. Assertively, Malcolm commands his band of little ghouls to kill Jonathan’s friends while he apologizes to Rebecca and uses the talisman to free her from her enchantment. However, his victory is fleeting, as she falls into a deep sleep. When she awakens to find Jonathan in a trance, she flees, only to face a terrible fate as the Ghoulies attack, leading to her tragic fall down the stairs.
In a shocking revelation, Jonathan discovers Rebecca's lifeless body next to those of his friends, all hidden beneath grim sheets. Malcolm appears with his dwarfish entourage, confessing he manipulated Jonathan's innocence for his resurrection, revealing that he is responsible for Rebecca’s death, not Jonathan. He then reanimates Rebecca as a ploy, but Jonathan’s friends catch wind of Malcolm's deceit. In the ensuing chaos, Wolfgang bursts forth, showcasing his magical skills against Malcolm. As the house begins to crumble, Wolfgang triumphs, causing both him and Malcolm to vanish into thin air. With their sinister plans thwarted, Jonathan’s friends are brought back to life, bidding farewell to Grizzel and Greedigut with an eerie vibe. As Mike, the skeptic, questions these bizarre happenings, Jonathan reassures everyone that it’s finally over—though uncertainty lingers in his eyes as he takes one last look at the ghostly figures departing.
