The film kicks off with Reggie (Reggie Bannister) racing through the desert, still relentlessly pursuing his adversary, The Tall Man (Angus Scrimm). In a turn of events, he hires a man for a lift only to discover he's now in his own car, which the man has stolen! After forcefully tossing the thief out, he quickly faces a pair of deadly spheres; one manages to take the man out while the other targets him. Yet, Reggie triumphs, only to wake up in a hospital where he is being cared for by Mike (A. Michael Baldwin), who is present as Reggie grapples with early-stage dementia.
While in the hospital, Reggie recounts his saga to Mike, introducing a surreal alternate-reality dream sequence where he encounters a woman who confuses him for someone else. Her car has broken down, prompting Reggie to offer her a ride to a cabin on a farm, where he also meets a Bulgarian named Demeter. Intrigued, she listens to Reggie's incredible tales about his encounters with The Tall Man, although she rejects his advances.
As the dream unfolds, Reggie plays his guitar but struggles to recall her name; he subsequently drifts off to sleep. But soon, The Tall Man invades his dream with even more lethal spheres. A haunting flashback reveals Reggie in the hospital once again, conversing with Jebediah Morningside, The Tall Man, who mournfully reflects on his dwindling time left and the loss of friends. They both acknowledge that they are nearing the end of their journeys in this life.
The next morning, awakening on the farm with the memory of her name—Dawn—of the woman he met, Reggie is devastated to find that she has fallen victim to the spheres. Grabbing a shotgun, he heads into a nearby barn, where he meets Demeter, who wields an axe. Tragedy strikes when a sphere invades the barn and kills Demeter, but Reggie fights back.
Switching back to his hospital room, Mike fills him in on a new, looming threat. The dream sequence resumes, leading Reggie through eerie woods, where he encounters a massive sphere in the sky before landing back in his hospital bed. Here, Reggie experiences a time warp back to 1979, where he prepares for a funeral in Morningside, reflecting on the futility of his struggles.
Reggie finds himself in a mortuary grappling with a dwarf named "Lurker," minions of The Tall Man, when the ethereal Lady in Lavender appears. He shoots her down, believing he has vanquished her, but the terror continues as he delves deeper into a large cave, where trembling confrontations and battles await him. The Tall Man taunts him about the dwindling chances for salvation, despite Reggie's pleas to bring back his deceased friends.
Caught in a disorienting dream sequence, Reggie becomes restrained on a gurney, facing armed figures. Among them is someone he initially knows as Dawn, now claiming her identity as Jane, who thinks he's lost touch with reality. As she tries to help him medically, evil dwarf Lurkers appear, but Chunk, another ally, saves Reggie, arming him for the struggles ahead.
Eventually, Reggie reunites with Mike, who informs him that their former home is now claimed by The Tall Man. The two navigate through increasingly haunting hospital corridors where the line between dream and reality blurs. In a gripping display of survival, they face enemies while struggling with the aftermath of the alien virus unleashed by The Tall Man, which has ravaged Earth's population.
The climax breaches as Jane falls into the hands of The Tall Man, prompting Chunk, Mike, and Reggie to pursue him into his lair on the red planet. The vacuum of tension culminates in Chunk's fiery sacrifice while battling The Tall Man. Back in the hospital, Reggie and Mike join forces against the terrifying Gravers, while old friends resurface, including Jodie, who drives a bullet-laden vehicle into their path. Their next move leads them north, a region where The Tall Man's influence is weakened by cold.
Just as the film reaches its peak, Reggie seemingly succumbs to his demise, leaving audiences in suspense. During the movie's end credits, a twist unfolds as Chunk appears through a portal, missing a hand and crossing paths with Rocky—another survivor from previous encounters. As he flirts with her, teasingly suggesting his potential, their reunion is overshadowed by Reggie and others arriving in their iconic Barricuda. The sky teems with ominous giant spheres, foreshadowing that the war against The Tall Man is far from over.
