The third and final film in the "Creature from the Black Lagoon" series begins with title and credits shown over an underwater background.
A car is seen driving down the Edison Bridge in Florida. Marcia Barton (Leigh Snowden) is driving with her husband, Dr. William Barton (Jeff Morrow) in the passenger seat. They pull up to the Yacht Basin in Ft. Myers, Florida and board the 102 foot Yacht, Vagabondia III. She exits the vehicle leaving Barton in the car. She is met by Dr. Thomas Morgan (Rex Reason) and introduced to the guide, Jed Grant (Gregg Palmer) and Dr. Borg (Maurice Manson). Dr. Barton finally comes on board. The ship's captain, Stanley (David McMahon) arrives in the cabin and inquires as to departure. The three scientists walk to the lab and greet Dr. Johnson (James Rawley). They check on equipment and discuss the capture of the creature in the Everglades. Dr. Johnson explains the finer aspects of his fish finder, but the scientists are distracted by gunshots up on deck. They go to investigate. Marcia is shooting at a couple of sharks. Her husband disarms her then goes below. Grant stays behind to talk to Mrs. Barton. They drop anchor and head for shore in a motorboat. The four scientists and Grant pay a call on Morteno (Paul Fierro) and his wife (Lillian Molieri). A badly scarred man, Morteno, thanks Grant for the food and money. Morteno was attacked by the creature and tells Barton the story. Morteno makes his living in the Everglades hunting alligators for their skins when the creature attacked. Dr. Johnson asks to examine the knife. The red blood corpuscle count matches the Ocean Harbor figures for the creature. Barton concludes that the blood characteristics are such that, "We can make the giant step, and bring a new species into existence." Dr. Morgan voices his opposition to Barton's plan, "But Doctor, there's no short cut. You can't bypass nature." When Barton threatens to return all the scientists back and start with a new group they agree to stay, even Dr. Morgan.
Grant and Morgan suit up and put on their scuba equipment for an underwater test. Marcia decides to join the men over objections from both Morgan and her husband. Grant assures Barton he will look after Marcia. The three enter the water from the Yacht. Borg, Johnson, and Barton go below to observe on the sonar. They are in radio contact with Morgan. They are slightly below 50 feet and pass schools of fish. A fourth object appears, but it is only a tarpon. They swim deeper when the creature (an uncredited Ricou Browning) appears. The divers don't see him yet, but Borg sees something on the sonar, and warns the divers it is shadowing them. The two men are testing the equipment and don't notice Marcia is no longer with them. She is behaving strangely and has removed both her swim fins. She is in trouble and pushes out her breathing mouth piece. Morgan takes her to the surface. The two men carry her on board. Barton is unhappy with Grant until he is informed that they found the creature. Morgan and Marcia begin to talk about why she takes chances and endangers her own life. She begins to tell Morgan about her life when they are interrupted by the steward (Frank Chase) who announces he must prepare the cabin for dinner. She returns to her cabin. Her husband is waiting and jealous. He reminds her, "You're my wife, Marcia. Conduct yourself that way. Don't ever try to leave me. Don't ever try to make a fool of me."
They weigh anchor and follow the creature using the sonar. It is early evening and they are working their way up stream into more shallow water. The creature is now astern and Morgan suggests they increase speed. They suspect the creature is leading them into a trap. When the water gets too shallow Capt. Stanley orders the anchor dropped. Grant and the four scientists board the launch and go in search of their prey. They carry the sonar and plenty of rotenone to stun the creature. They venture deeper and deeper into the lagoon. While Borg tracks his progress on sonar, Grant searches the water with a spotlight. They hear splashing and the creature launches out of the water and attacks the spotlight on the bow of the boat. They light gasoline torches and place them on the bow and stern. The creature attacks again, this time he jumps up on the stern of the small boat. Grant hits him with a spear, but the creature pulls it out. Grant gets him with another spear while the creature pours gasoline over itself. A well-aimed throw of one of the torches causes the creature to be engulfed in fire. He falls back into the water. The creature pushes the boat up and all aboard go into the shallow water. The creature tries to move a log, but collapses. Drs. Barton and Morgan carefully approach the fallen beast. Barton examines the creature and pronounces, "The drug knocked him out, all right." Morgan observes, "If it hadn't the fire would've. These are third-degree burns." They carry the creature back to the boat.
On an operating room table aboard the yacht, the creature (an uncredited Don Megowan) is heavily bandaged covering his burns. Barton observes, "He isn't converting enough air into oxygen. The fire severely damaged his gills and he is dying of suffocation." Borg enters the room and puts up X-rays. They notice that the creature has lungs and speculate he may be able to breathe on land like lung fish. They do a tracheotomy immediately and Barton states, "We are changing a sea creature into a land creature." Borg does some tests that indicate there may be some brain damage. The creature seems to revive and breaks the restraints holding his arms to the gurney. They examine the creature's eyes.
With their creature somewhat settled, Barton sends a wire to his ranch in Sausalito, California to have things ready for his arrival. They will take the Panama Canal and will arrive August 20th. They are under way. Marcia wants to see the creature but Dr. Johnson tells Mrs. Barton her husband says no. Marcia leaves, but encounters Grant in the passageway. He makes a play for her, but she brushes him off. The four scientists remove the bandages from the creature. They notice changes in the skin. The hand is more humanlike, less webbed. They remove the bandages from around the head. It has also undergone a transformation, "The fire burned away the out scale. There's a structure of human skin underneath it: two separate coverings, the way he had lungs and gills," Barton proudly announces. The creature looks first at Morgan, then turns his head to stare at Barton.
Morgan and Barton decide to celebrate, but first ask Grant to make the creature some clothing out of sail cloth. Mrs. Barton and the scientists celebrate with liquor. Barton and Morgan discuss genetics and the creature. Morgan again reiterates his concern over their work. Morgan leaves the cabin to check on the creature. A very drunk Barton asks Johnson and Borg if they agree with Dr. Morgan. Both are non-committal and excuse themselves. This leaves husband and wife alone to chat, but it ends badly and Marcia spends the night in the main salon instead of her cabin with her husband. Grant takes this as an invitation to try his luck with the lady again. The creature pops the lock on his cabin door and goes for a stroll down the passageway. He hears Grant and Marcia and goes to investigate. Marcia is trying to fight off Grant's unwanted advances when the creature enters. He attacks Grant then heads for deck. He jumps into the ocean, but with damaged gills he will drown underwater. Morgan grabs an air hose and dives in to rescue the creature. Morgan finds the creature and they struggle, but eventually it takes the air from the hose. Morgan hauls the creature back to the surface, periodically feeding it air from the hose.
A large truck arrives at the ranch. It is followed by a car. Armed ranch hands greet the vehicles. Grant opens the truck. The creature, wearing his canvas clothes, walks down the ramp and enters his caged enclosure. He scares some sheep that share his pen. Barton throws the switch on an electrified fence. That evening the creature just stands in his enclosure and stares at the water. Morgan observes the creature, and overhears Barton and his wife argue. Barton joins Morgan to observe the creature through a two-way mirror. Barton is happy and notes the creature is becoming more human every day. The discussion turns obliquely to Barton's marriage and behavior. Morgan confides in Marcia how concerned he is with her husband. He admits he thinks Barton is disturbed, "Your husband needs help." Marcia goes for an evening swim. Grant appears in a bathrobe carrying a towel. Grant dives into the water, over her objections to his company. A mountain lion appears attracted to the sheep. It climbs a tree and gains entry to the enclosure. The creature attacks and kills the cat. The commotion draws the attention of the scientists. Barton observes his wife with Grant. Later that evening, Barton stews and frets over the increasing realization that his wife and Grant are too close. Barton confronts his rival and orders, "Get up. Pack your clothes and get out!" Grant agrees but only if he can spend the night, but Barton insists that it be now, tonight. Barton pays him his wages in cash. Grant packs and walks away, but can't resist taunting Barton about his wife. Barton, enraged and jealous, repeatedly strikes Grant on the head with the butt end of his revolver. Barton realizes he's killed Grant in a fit of rage. He decides to put the body in the creature's enclosure so he can blame the creature for the man's death. The enraged creature tears the door off his enclosure and chases Barton back into the house. It trashes the room and searches for Barton. It encounters a hysterical Marcia and Morgan. It spots Barton making a break for it outside and gives chase. It catches Barton and throws him off the second floor balcony to his death. The creature calmly walks down the outdoor stairway and destroys his enclosure and walks away.
Some days later the remaining scientists, in the living room of the house, wax philosophical about the creature. Mrs. Barton descends the stairs well dressed, and carrying a suitcase. Other suitcases are stacked up at the bottom of the staircase. She thanks the scientists for their help. A state trooper (Larry Hudson) gets a phone call and announces that the creature has been spotted. We close with a shot of the creature finding his way to the beach. His clothes show signs of at least four bullet holes but he manages to walk on toward the water.