In 1983, a boy named Billy Parks has difficulty falling asleep after waking up from a nightmare. His mother, Mary, assures him that the monster he thinks is in the closet is imaginary. As he tries to fall asleep, a dark apparition emerges from his closet and spirits him away.
In 2002, psychology grad student Julia Lund, Laura Regan, reunites with her childhood friend, a grown Billy. Julia experienced night terrors as a child after witnessing her father commit suicide, but has seemingly overcome the problem. Billy, startled by flickering lights in a diner and deathly afraid of the dark, tells her that he believes their night terrors are caused by something otherworldly. As a child, he was kidnapped by mysterious creatures and went missing for two days. He warns her to stay out of the dark, then shoots himself.
Julia Lund, Laura Regan, stays over at her boyfriend Paul, Marc Blucas, apartment to grieve. That night, Julia hears the shower running and investigates. She finds a black fluid erupting from the sink drain, and the bathroom mirror opens to an alternate dimension filled with mysterious creatures. Paul, hearing her screams, finds her alone. He suggests she might have been sleepwalking, since she does not remember what happened.
At Billy's funeral, Julia meets two of his friends and roommates, Terry and Sam, who also had night terrors as children and have begun to believe his claims. Julia visits Billy's childhood room and discovers a drawer full of batteries. Later, as Julia drives, a creature sprints across the windshield, and the SUV's engine stops. As Julia attempts to restart it, she is startled by a vision of Billy and is nearly hit by a truck.
At Terry and Sam's apartment, the trio studies Billy's diary. Terry and Sam ask Julia if she has experienced a return of the night terrors, which she denies. Terry says her night terrors started after she witnessed her sister drown in a lake. In one instance, she disappeared from her bedroom and returned in the dog house; when her father reached in for her, she stabbed him in the eye with a kitchen knife, convinced he was a demon. Julia meets a girl named Sarah, one of Dr. Booth's patients, who claims that "They" will eat her in her nightmares and that the only thing that keeps them away is light. She starts picking at a strange mark on her arm; a similar mark had also appeared on Billy's hand, Sam's shoulder, and Terry's ankle. The creatures soon take Terry and Sam.
Julia discovers the mark on her forehead and pulls out a long black needle. She runs to Paul's. Paul, convinced that she is insane, drugs her with a sleeping pill and calls Dr. Booth. Julia runs to the subway and becomes trapped in the station. She boards a train home and is the only passenger. The lights flicker, and the train stops. She gets off and sees all the light bulbs burst in the tunnel. The creatures attack her, but Julia manages to escape. When a group of tunnel workers attempt to help her, Julia assaults them with shards of glass, convinced they are inhuman.
Julia is committed to Dr. Booth's mental institution, where she is attacked and transported into the dimension she saw, this time inside a closet. She screams for help from Dr. Booth and an orderly, but neither can see nor hear her. Dr. Booth closes the door, and the creatures drag Julia away.
