Two maintenance employees of a nuclear power plant are conducting an outdoor safety check when they become anxious to leave. Eager to get to the local bar and have a drink, they skip part of the test. Unfortunately a large buildup of pressure causes a yellow toxic gas to leak from one of the pipes. The gas forms into a large cloud that drifts across the ground.
Nearby, a school bus carrying six students home from school is driving along the road. Cathy Freemont (Gale Garnett) passes the bus and waves to the children, when suddenly the large cloud of toxic gas drifts into the road. Both vehicles drive through it.
Cathy arrives home, but the school bus is detained somewhere. Sheriff Billy Hart (Gil Rogers) finds the bus haphazardly parked along the side of the road, apparently abandoned in a hurry, with no sign of the children or the bus driver. Hart pays a visit to the home of Tommy Button, one of the children on the bus. Tommy lives with his mother, Leslie (Suzanne Barnes), and her female lover, Dr. Joyce Gould (Michelle Le Mothe). Leslie apparently spends her life dazed and heavily medicated, while Dr. Gould is hostile toward the sheriff for no good reason. She accompanies him to the site of the abandoned bus, where she finds Tommy's things on board. When Hart departs, Joyce goes to walk home when she spots a figure standing in a nearby cemetery. She recognizes it as Tommy, just as it disappears among the gravestones. She rushes up into the cemetery, where she stumbles across the horribly mutilated body of the bus driver; he seems to have been burned from within his clothes, his flesh horribly charred and disfigured. Suddenly Tommy appears behind Joyce, his fingernails black. Relieved, she sweeps him into a reassuring hug, suddenly screaming in agony as her flesh begins to char. Tommy's hands are roasting Joyce alive, and her burnt body falls beside that of the bus driver.
The five children have been transformed into smiling zombies by the cloud of radioactive vapors, intent on burning alive anybody who comes into their path. They move through the town, visiting their parents and families, most of whom are caricatures of bad parenting. Little Janet Shore's parents are swingers who don't even know or care where their daughter is. Paul MacKenzie's sister is a slutty blonde who is more interested in bedding the dopey town deputy. Cathy Freemont is pregnant with her third child, yet she still gives in to smoking in times of stress. John Freemont (Martin Shakar) joins the sheriff in the hunt for the children, trying to keep from Cathy that their daughter Jenny is among the missing children.
John and Sherrif Hart find charred bodies all over the town of Ravensback, the handiwork of the children. Nobody suspects that the children are behind the deaths, and everybody makes the mistake of hugging the kids when they come across them. John and Hart make the connection about the killer children and John rushes home to protect Cathy and the youngest Freemont child, Clarkie, who escaped the cloud of poisonous gas because he was at home that day with a cold. Along the way, they encounter Janet Shore, who is dazed like the other zombies, but apparently still human--her fingernails are normal. They take her along in the back of Hart's squad car.
Meanwhile at the Freemont house, the zombified Jenny attempts to return home, and Cathy joyfully rushes out to greet her, but John intervenes and Jenny scorches his hand before he can get away from her.
John and Hart barricade the house and start firing on the children, who have congregated in the yard outside the house. Bullets have no effect on the zombies, which get back up and continue to walk around. While the adults are distracted, one of the killer children sneaks into an upstairs window of the house and fries Clarkie to death. It then tries to kill Cathy, but John attacks it with a sword, slashing out and chopping off its hands. It instantly dies, howling in pain.
Armed with a machete, John hunts the children, cornering them in a barn, until he has hacked most of them to death. Unfortunately, he forgets about Janet Shore, whose fingernails have changed to black. She chars Hart to death, lurching at him out of the back seat of his car. John hacks Janet to death in retaliation.
John is distracted by the cries of Cathy from inside of the house--the baby is being born. As the sun rises, the sounds of Cathy giving birth to her child fill the house. The baby is born and all seems well, until John notices it nursing at Cathy's breast, its fingernails black.