The film opens with a security guard named Dennis investigating a deserted film vault at an old movie studio. Inside, his dream of becoming a rock star briefly comes true as he performs on a stage, but he dies at the moment of triumph. His boss, Mr. McCreedy, James R. Sweeney, closes the door upon discovering the body and quietly guards the secret of what lies inside.
A young man named Kevin, Tom Bartlett, takes the vacant job to impress his girlfriend, Amy, Paige Sullivan. After his first shift, he arrives home to find his two friends, the sex-crazed Daphne Kelley Palmer and the nerdy Kyle Steven Boggs, waiting with Amy Paige Sullivan. Also present is Nick Billy Frank, Daphne’s Army boyfriend, who adds to the rowdy dynamics. The group teases Kevin with a long, silly contest in which he spars with a rake and a garden hoe; Kevin loses, Amy berates him for his weaknesses, and Daphne and Nick retreat to Nick’s van for a private moment, leaving Kevin to feel the sting of insecurity and the pressure to prove himself.
The following evening, while pursuing a burglar, Kevin stumbles onto the vault’s hidden contents: a small group of hairy, demonic hobgoblins that escape into the night. Mr. McCreedy explains that these beings crash-landed on the studio lot decades earlier and have been closely guarded by him ever since. The hobgoblins possess a hypnotic power to turn a person’s deepest fantasies into reality, but those fantasies come with a deadly price as they recoil against their host.
The hobgoblins waste no time and head straight to Kevin’s house, where his friends are partying and the lights draw them in. The creatures grant their hosts’ fantasies, but the results are chaotic and dangerous. Amy’s fantasy pulls her toward the gleaming, sleazy Club Scum, where she reveals a hidden desire to shed her sexual inhibitions and become a stripper, and Kevin and the others follow in pursuit, curious and alarmed about what this power can do to their lives.
As the night spirals, Nick is granted a heroic fantasy of leading a commando raid. In the ensuing chaos, he is cast onto fire by a hand grenade thrown by his own commanding officer and appears to be killed—only to return later, bandaged and on crutches, seemingly unharmed but deeply altered by the experience. Kevin manages to kill the hobgoblin controlling Amy before she can become involved with Roadrash, the scruffy bouncer from Club Scum, Duane Whitaker. Amy returns to her original self, though the night leaves her with a new sense of freedom and reduced inhibition.
Believing the danger is over, Kevin, Amy, Kyle, and Daphne return to the studio lot to report to McCreedy. The burglar from earlier reappears as another phantom, and McCreedy shoots the controlling hobgoblin, saving Kevin’s life. The remaining hobgoblins retreat to the vault, which McCreedy seals with explosives. The creatures are blown to pieces, ending their immediate threat. In the aftermath, Amy promises to share a night of intimacy with Kevin, Nick returns to Daphne, and Kyle, the outliers, asks to use McCreedy’s phone, signaling that the night’s strange events may not be completely over.
