As the impressive Clamp Center skyscraper looms over Manhattan, an unusual series of events begins to unfold. Following the passing of Mr. Wing, his mogwai protégé, Gizmo, finds himself in a precarious situation under the watchful gaze of Chief Researcher Doctor Catheter. However, salvation comes unexpectedly when Billy Peltzer and his fiancée Kate Beringer, who are also working in the building, rescue him from captivity.
In the midst of this, the ambitious mogul Daniel Clamp becomes captivated by Billy's talent for design, forming an unlikely friendship that intrigues Billy's supervisor, Marla Bloodstone. Clamp's substantial influence rapidly spreads throughout the office. Meanwhile, a fateful interaction between Gizmo and a malfunctioning water fountain leads to the birth of four new mogwai, who then manage to trap Gizmo in the ventilation system.
As midnight strikes, these pint-sized creatures unleash chaos in the food court, evolving into the roguish gremlins that threaten the Clamp Center's very existence. Once freed, Gizmo becomes a target for the gremlin named Mohawk, who immediately begins to inflict torment upon him.
The ensuing pandemonium reaches astonishing proportions as the mischievous gremlins inadvertently activate the fire sprinklers, prompting an avalanche of mayhem that sends the entire building spiraling into disarray. In a desperate attempt to contain the creatures, Billy makes a stand in the lobby, where he hopes that exposure to sunlight will eliminate this new menace. To further confuse the creatures, Clamp cleverly disguises the building's entrance with a massive sheet before escaping down a secret tunnel.
As the chaos is broadcast live on television, Grandpa Fred and Japanese tourist Mr. Katsuji provide colorful commentary, while Billy's neighbor Murray Futterman, visiting New York with his wife Sheila, confronts a bat-gremlin hybrid that has become immune to sunlight thanks to its smart counterpart's "genetic sunblock." After dispatching this grotesque creature, Murray finally proves his sanity and feels drawn to aid the cause.
Meanwhile, as Clamp flees, Murray seizes the chance to sneak in and support Billy, but their attempts are thwarted when Chief of Security Frank Forster collaborates with Billy, only to be sidetracked by a lovesick female gremlin, affectionately referred to as "Greta." The relentless Mohawk, transformed into a nightmarish gremlin-spider, attacks Kate and Marla, yet Gizmo heroically saves the day by vanquishing this horrific being with a fiery makeshift weapon.
Just when Billy thinks he has the situation under control, Mother Nature delivers a torrential downpour, altering his thoughtfully constructed battle plan. Unfazed, he devises a new approach, instructing Murray to unleash a powerfully forceful blast from a fire hose, followed by an electrifying attack with an electrical hose. These dramatic measures successfully neutralize the threat, bringing Billy a sense of relief and victory.
Amid the turmoil, Clamp appears with the media and law enforcement, only to realize that the crisis has been averted. Elated by the turn of events, he rewards Billy, Kate, Fred, and Marla with promotions, while also offering Mr. Katsuji a chance to take on a role behind the camera. As the chaos diminishes, Billy and Kate head home with Gizmo safely in their arms.
In a curious twist of fate, Forster finds himself stranded on the uppermost floor, forced to confront the last surviving gremlin, Greta, whose crafty nature introduces an unexpected proposition of marriage that leaves him in a precarious situation with no easy escape from this bizarre attraction.
