On a yacht off the Pacific Northwest coast near Grave's Point, Howard Griffin and Elizabeth Griffin share a quiet, romantic night that turns suddenly deadly when a freak failure sinks the vessel. Stranded in a lifeboat, the couple is attacked and eaten by an unseen predator, leaving the harbor and its residents to grapple with what just happened.
The following day, local fisherman Whip Dalton [William Petersen] and first mate Mike Newcombe [Sterling Macer Jr.] discover the empty lifeboat, a large claw still clinging to it, and bring the evidence to light. Whip sends the claw to a university for analysis, where marine biologist Dr. Herbert Talley [Ronald Guttman] and his assistant Christopher Lane [Murray Bartlett] determine the markings point to the tentacle of a giant squid. Their foreboding assessment sets off a cascade of fear across Grave's Point as more deaths occur.
Harbor master Schuyler Graves [Charles Martin Smith] and his assistant hire Lucas Coven [Larry Drake] to hunt the squid, despite Whip’s caution to leave it alone. The town rallies around the hunt, and the crew manages to kill a squid, its carcass quickly sold to Sea Land Texas owner Manning. The harbor briefly celebrates, but the discovery of a sonar signal signaling a much larger creature reveals that danger is far from over.
Whip and Talley are denied access to the initial carcass, so Talley organizes a submersible expedition to study the squid’s habitat. Their analyses reveal that the captured specimen is only a 37-foot, 2,000-pound baby, yet the mother, a far larger 66-foot, 3,000-pound predator, is now driven by vengeance rather than hunger. The mother’s attack on the expedition results in the deaths of Jamison and Christopher, escalating the stakes and angering the town.
Whip blames Graves for the tragedy, and Graves responds by using blackmail to force Lucas to resume the hunt. Talley makes it clear that the mother squid is seeking vengeance for her offspring, a detail that deepens the peril as fear transforms into a relentless mission.
Lucas returns to the water with Mike and Scranton, battling stormy weather as they press the hunt. A brutal sequence follows: Scranton is devoured, Mike is injured, and Lucas drowns. Whip arrives just in time to pull Mike from the sea and rush him to the hospital. After learning that the squid came ashore, Whip agrees to track it down again, insisting he must use his own boat, with Graves at his side. They are joined by Talley, Manning, and coast guard officer Lt. Kathryn Marcus [Karen Sillas].
The team devises a plan to snare the squid, reel it in, and inject it with cyanide darts. The trap appears to work and the squid seems dead, but Manning’s treacherous twist—having loaded the darts with tranquilizer to keep the creature alive for a profit—allows the monster to awaken. Graves attempts to escape on a lifeboat as Whip severs the trap, and the enraged predator bites loose and begins its ferocious comeback.
The creature kills Graves, then returns to attack Whip’s vessel, taking Manning and grabbing Talley along the way. A Coast Guard helicopter swoops in to rescue Kathryn and Whip. In a desperate final gambit, Whip uses an axe to breach fuel drums and a flare gun to set his boat ablaze, forcing the squid into the fiery trap. The boat explodes, destroying the predator, and the helicopter ferries Whip and Kathryn back to shore, where they reunite with Whip’s daughter Dana [Missy Crider].
