In northern California, on the night of Saturday, October 23, we see a man running down a semi-rural road as the movie opens. Obviously being pursued, the man Harry Grimbridge (Al Berry) runs into a junkyard to try to hide or find help. Then we see his pursuers coming down the road in a car and enter the junkyard. The man tries to hide, to no avail; a well-dressed man who is stronger than he looks confronts him and begins choking him. The resourceful man saves himself by pulling a chock out from under a junked car, which rolls forward and pins his attacker against another car, allowing him to break free. Another well-dressed man (Dick Warlock) gets out of the car, but the pursued man flees across the junkyard on foot to dubious safety.
A short distance away, as a storm begins to pass through, a gas station attendant named Walter Jones (Essex Smith) is passing time watching a news report about Stonehenge. The reporter is talking about an unsolved theft from some nine months earlier; someone had stolen a stone weighing several tons from Stonehenge in England and the local police are baffled. The TV cuts to a commercial for Silver Shamrock masks before the storm knocks out the power. Just then, the man from the junkyard bursts into the gas station, clutching a Silver Shamrock Halloween mask, begging for help. The attendant, clearly disturbed, takes the man to the hospital.
Meanwhile, not too far away, the recently divorced Dr. Dan Challis (Tom Atkins) stops off at home to see his ex-wife Linda (Nancy Kyes) and their two children. He's late arriving, a not uncommon occurrence with him. He has brought the kids some masks for the upcoming Halloween, but they are disappointed, saying "Mom already got us masks". They were Silver Shamrock masks. While Dan and his ex are talking, the kids turn on the TV and see another Silver Shamrock commercial, which they seem to enjoy immensely. Dan's beeper goes off - he is needed at the hospital. After promising to pick up the kids next weekend, he leaves.
At the hospital, Dan meets the guy from the junkyard, and talks briefly to the gas station attendant who drove him in. The guy wakes up when he hears yet another Silver Shamrock commercial on a hospital TV, gasping out "They're going to kill us!" while still clutching his mask. Feeling the man is deranged, Dan has him sedated and put in a hospital bed to recover. There being no further patients at the moment, Dan, making the most of having been recently divorced, goes off to flirt with the nurses, drink some beer, and take a nap in the doctors' lounge.
Not long after, a car arrives at the hospital, and another silent, well-dressed man steps out and enters the building. He walks to the junkyard guy's room, where he is sleeping. The man clamps one of his hands over the guy's mouth (waking him up), and uses his other hand to poke his fingers in the guy's eye sockets and pull his skull apart. He is much stronger than he appears. A nurse walks in just then and confronts him; the man just walks away. Seconds later, the nurse sees what just happens and screams. Dan Challis, woken from his nap, comes running, just in time to see the man walk back to the parking lot. Dan runs out to confront him, but the man is already getting back into his car. Rather than drive away, he drenches himself with gasoline and lights himself on fire, causing an explosion which destroys both himself and the car.
In the morning, the police are investigating, while Dan is arguing with his ex-wife over the phone. A dark-haired girl (Stacey Nelkin) walks into the room, the daughter of the man who was killed. Her name is Ellie Grimbridge, and we then learn the dead guy's name was Harry Grimbridge. Dan and the police try to comfort Ellie as best they can after she identifies the body. Both Dan and the police are bewildered by the event. After hearing the description, the police thought the well-dressed murderer was on drugs, but Dan, the doctor, said it appeared the man was in complete control of himself.
In the middle of the week, Dan goes to see the assistant coroner, a woman named Teddy, and asks her what she has discovered. The answer is not much, the guy was just ashes. She will be looking at the remains of the burned car for clues for awhile yet. Dan asks her to keep him posted. He has still clearly rattled by the event and wants some answers.
On Friday, two days before Halloween, Ellie finds Dan alone in a bar, where he had been drinking and watching TV. One of the nurses had told her she would probably find him there. She thanked him for attending her father's funeral and asked him if he had seen anything that might help her figure out what had happened. Dan, still wanting to know what had happened, told her about the mask and her father's last words - "They're going to kill us!" Dan and Ellie go to the late Harry's store downtown. It had been a distressed toy store before Harry's death; now it was "closed until further notice". The new shopping malls had siphoned off a lot of his business, but the town's children had been keeping the store afloat. There, Ellie showed Dan her own investigations. Harry had kept meticulous records at his business, and everything checked out until October 20, when he had gone to pick up more masks - Silver Shamrock masks, which were selling well. Dan remarked that Harry had been holding a Silver Shamrock mask when he was killed. Harry had never made it to his appointments on the 21st.
Ellie wanted to go to the Silver Shamrock factory to investigate further, and Dan, intrigued by the mystery (and attracted to Ellie), went along with her. Just before driving out of town in Ellie's car with only a cooler for luggage, Dan calls his ex-wife to back out of his promise to pick up the kids the next afternoon, promising to pick them up on Halloween instead. As Dan and Ellie drive away, we see some TV's in a store window showing yet another Silver Shamrock commercial.
In the weeks leading up to Halloween, Silver Shamrock had undertaken a major advertising blitz, saturating the airwaves with a catchy but obnoxious commercial for its Halloween masks, that counted down the days until Halloween to the tune of "London Bridge". The announcer in the commercial said that Silver Shamrock would be sponsoring the airing of the movie "Halloween" on Halloween night, to be followed immediately (at 9 p.m.) by a "big giveaway" - for which all the children were supposed to wear their masks and watch the TV closely.
On Friday afternoon, Dan and Ellie arrive in Santa Mira, home of Silver Shamrock, a small town that seems to give off some weird vibes. It was founded in 1887 by Irish immigrants, and the principal (almost the only) industry was the Silver Shamrock factory, started after World War II by a man named Conal Cochran. They drive past the factory, which looks like the only major industry there. The townspeople stare at them, making them both uncomfortable. They see loudspeakers and moving video cameras on top of the utility poles. Not knowing exactly what to do next, they go to a cheap motel and rent a room, where they can talk strategy in privacy.
While the motel keeper Rafferty (Michael Currie) is showing Ellie the room, Dan goes off to the office, ostensibly to pay the bill, but he checks the register while he was there. Harry Grimbridge's name was on the register. Ellie sees Cochran's car drive past, although she can't see inside the darkened windows. On his way back from the office, Dan meets another hotel guest, Buddy Kupfer, a Silver Shamrock salesman; and his wife Betty and bratty son "Little Buddy". He also meets Marge (Garn Stephens), who sold, among other things, Silver Shamrock masks at her store in San Francisco. Buddy seems to be enjoying the trip, but Marge is put out at having to come all the way to "this dump" because the factory messed up an order.
Ellie wants to go to the factory right away and investigate further, but Dan convinces her to hold off for awhile. After a moment of awkwardness, in which time Dan isn't sure how well an advance would be received, Ellie gives him a clear opening, and he pounces on it. Outside, late afternoon is moving towards sunset, and at 6 P.M., the loudspeakers announce that the town is under curfew for the night.
After dark, Dan goes out to the liquor store (which is open in spite of the curfew); on the way back, he meets Starker, who begs a drink from the bottle off of him. Dan, seizing an opportunity to collect information, asks Starker about Cochran and Silver Shamrock, and he has nothing good to say about him. He had applied for a job there years before, but had been turned away; in fact, all of Cochran's workers had been brought in from outside Santa Mira. In contrast to the motel keeper who had praised Cochran, Starker pointed out the video cameras and cursed Cochran. He then said that he hoped to burn down Cochran's factory some day. Dan gave him a tip for his information and went back to the motel. Cochran apparently really was paying attention, because a few minutes later, Starker is confronted by two more well-dressed but strong, silent men. He tries to back away from his drunken statements, but the men are unmoved, and they pull his head off of his shoulders with their bare hands.
Back at the motel, Ellie meets Marge, and they talk briefly about the factory and the masks. Marge notices that the quality has suffered a little bit - the trade mark tag fell off one of the masks. Marge returns to her room, where she accidentally knocks the tag onto the floor, where it falls upside down revealing a small microchip - but she doesn't notice right away, sitting in bed reading. Meanwhile, Dan arrives back at the motel, and stops at the office to call Teddy. Teddy's investigation has gone nowhere - she found no human remains and had to assume that someone had mixed up the envelopes, and she had wasted two days examining burnt car parts. Dan returns to the room, where he and Ellie have a drink.
While they are enjoying themselves, Marge decides she's had enough reading for the night and gets ready to sleep, but sees the trademark and the microchip on the floor and, being curious, starts to examine it and poke at it with a hairpin. That was a fatal mistake - a lightning bolt shoots out of the trademark at Marge's head, burning it almost beyond recognition. A single bug crawls from her mouth as she dies.
Dan and Ellie are woken by yet another disturbance outside. It's a van, not an ambulance come to pick up Marge. The men from the van ignore Dan's offer of help, despite the fact that he is a doctor. As the van leaves, Conal Cochran (Dan O'Herlihy) pulls up and we meet him for the first time. Dan overhears the motel keeper tell Cochran that Marge had been hit by a "misfire". What could that mean?
The next morning is Saturday the 30th. Dan calls Teddy at work again. Teddy has examined all the ashes, but not found a single trace of human remains, and she is wondering if someone has been tampering with the evidence. Dan asks her to investigate Cochran - a dangerous move, because as Dan leaves, we see that the telephone was bugged.
Dan and Ellie go to the factory in the morning, but learn nothing except Harry had picked up his masks and left. They are ready to go, but they meet Buddy Kupfer on their way in for a tour of the factory. Cochran comes out to meet them, and Buddy convinces Cochran to have them along on the tour. They see the workers making the masks. After seeing the masks, Cochran takes them to another room where there are some other Silver Shamrock products besides masks - mostly toys and novelties. Cochran gives Buddy Jr. a mask that has been through "final processing" - but he remains evasive about what final processing entails. He invites the Kupfers to breakfast the next morning, asking for Buddy's opinion about some more sales materials.
While Cochran and Buddy are talking, Dan's attention wanders, and he spots several of the well-dressed guards. While he is telling Ellie in a low voice about it, Ellie spots Harry's car in one of the buildings. She runs forward to check it out, but several more of the well-dressed men step out from their posts and block her path. Dan and Ellie return to the motel room and go over what they know as it gets dark outside. They decide to leave the town and call the police.
Dan goes to the office, but he cannot reach anyone on the telephone. No matter what number he dials, he gets a recorded message that the call cannot be completed. Returning to the motel room, he discovers Ellie is gone. She has been kidnapped by the well-dressed guards. The guards come for him next. Dan escapes out the bathroom window and ditches the guards, who are also driving up and down the streets looking for him. Dan tries to use a pay phone, but he gets the same recorded message there, too. Hoping to rescue Ellie, he goes to the factory, sneaks onto the grounds and breaks into the building.
At first he sees no one, but after a brief search, he finds an old woman knitting. When he confronts her, he finds that the old woman is actually an elaborate machine! Then another one of the well-dressed guards finds him. Dan fights him, but he seems to be unaffected by his punches. After Dan punches him again, the guard goes limp, Dan pulls wires out of the guard's stomach and oil flows from his mouth. The guard was a far more elaborate machine! Two more guards come up behind Dan. He had trouble beating one, and he has no chance against two. Cochran comes to see them before the guards take Dan to wherever he is to spend the night.
On Sunday, Halloween morning, Cochran and several of the well-dressed mechanical guards accompany Dan to the "final processing" room. On the way there, Cochran brags about how realistic his guards and other workers were. Once in the final processing room, Dan sees several workers on a scaffold chipping tiny pieces out of a large rock... the stolen stone from Stonehenge! There are some work stations and TV's arranged in a circle in front of the rock. The workers take a tiny particle of the rock and put it in the microchips on the back of each trademark on the masks.
Cochran shows Dan on the video monitors Ellie tied up in another room, Marge's corpse, and then, the room into which the guards are escorting the Kupfer family. The room is ominously labeled "Test Room A". The room is made up to look like an ordinary living room. At Cochran's order, one of the guards pushes the buttons to make a video play on the TV in the test room, where Little Buddy is trying to watch TV. It is the video that will be played later that night - the "big giveaway" video. It opens like any other Silver Shamrock commercial, but as the announcer exhorts his audience to watch, the video gives way to a jack-o-lantern flashing on the screen. After a few seconds, the rapt Little Buddy grasps his head and collapses. Multitudes of bugs and snakes crawl out of the mask. Betty faints; Buddy Sr. freaks out and tries to escape from the locked room, but he is attacked and killed by the snakes. The flashing jack-o-lantern and sounds from the commercial trigger the particle of rock in the microchip - now we see how the death of Marge was an accident, it had gone off when it wasn't supposed to. After a couple minutes, the entire Kupfer family is dead, and Cochran cuts the video and has the guards lead Dan away.
Next, we see children in cities all over the country hearing the commercial reminding them to watch the big giveaway at 9:00pm, buying Silver Shamrock masks, trick-or-treating. Challis's own kids are anxious to watch the big giveaway while wearing their masks.
In the evening, Teddy is still trying to make sense of the autopsy, and tries to reach Dan in Santa Mira, but she gets the same recorded message that Dan heard. She tries the chief coroner instead, realizing that a lot of the things she has found in the ashes didn't look like car parts. Suddenly realizing something, she reaches for the phone once more to call the police, but one of the well-dressed guards from Silver Shamrock has snuck up behind her and kills her with a power drill.
At 7:30 p.m., Cochran leaves Dan tied up in a room in front of a TV playing John Carpenter's "Halloween" - to be followed by the big giveaway. Dan asks him why. Cochran explains that the "good" reason is that it's all a great joke, but the "real" reason is he is carrying on an ancient Celtic tradition of ritual sacrifice. Cochran puts one of his masks over Dan's head and wishes him a happy Halloween just before he leaves.
Once he has left, Dan looks at the clock and sets to work about trying to escape. He manages to scoot his chair over toward the TV, then kicks the screen in. At least the flashing jack-o-lantern can't come on now. Using a piece of broken glass from the TV, he cuts the straps that bind him, removes the mask, and throws it over the video camera watching the room. The room is locked, but Dan escapes through the ventilation ducts. It's after 8 p.m. now and time is running out.
One of Cochran's worker-androids notices that Dan is no longer in the room, and they set about looking for him. He has, by this time, escaped to the roof of the building, and finds another way back in. He has to play hide-and-seek with the guards again. Then he finds a phone, tries it, and it works - Cochran had cut off the town's access to outside lines, but not from within the factory itself. He calls his ex-wife and desperately tries to convince her to get rid of the Silver Shamrock masks, but she refuses. She is angry that Dan has once again broken his promise (this time to pick the kids up on Halloween and take them trick-or-treating), accuses him of being drunk and/or jealous that the kids liked the masks better than the ones Dan picked out. She tells him to go to hell and hangs up. He can't try calling her again because the guards are coming back.
Dan searches the building some more, and finds the room where Ellie is being held. He releases her, but the guards can now see him on the video cameras and know where he is. He manages to escape them for the time being, coming to the back of the final processing/control room. There he finds a box of the microchips - ready to be installed on the masks. An idea comes to mind.
He takes a box of the microchipped trademarks, sneaks over to the computers and pushes the buttons he saw the guard push that morning - the ones that start playing the big giveaway video. This time, it starts playing on all the TV's in the control room. He runs back to the edge of the room and climbs onto a catwalk overhead and dumps the box onto the floor below. The microchips activate as they get near the TV's playing the flashing jack-o-lantern, "killing" the worker-androids - but not Cochran, who looks up at them, unaffected, and applauds. The flashing TV's, forming a circle, and the rock from Stonehenge, start to glow; something supernatural is taking place. Lightning bolts shoot out of both towards Cochran, who is transformed to stone and disappears. Then sparks fly from the stone and everything in the room starts to catch fire. Soon, the entire factory is burning - Starker got his wish posthumously. Dan and Ellie get into Ellie's car, still at the motel, Dan driving this time, and escape.
Dan and Ellie escape from Santa Mira, but the commercial is still set to go on the air at 9 p.m., which is only about 15 minutes away now. Dan asks Ellie if she can think of anything, then notices how strangely passive she has been and... how she hasn't spoken a single word since her rescue. When Ellie turns her head and attacks him, he realizes that the Ellie he rescued was another android, with a new skin to look exactly like the real Ellie (the real one presumably having been killed by the well-dressed guards or perished in the fire). Dan wrecks the car trying to fight off the 'Elliebot'. The crash rips one of robo-Ellie's arms off, and Dan has little trouble dispatching the rest of her with a tire iron by decapitating her, but now he is without transportation, and takes off running on foot. It's about 8:50 p.m. The 'Elliebot' continues to function.
Panting and desperate to find a phone, he arrives at a gas station.... the same one where Harry took refuge eight days earlier. The attendant recognizes Dan from the hospital: "Hey, don't I know you?" It's straight-up 9:00 when Dan pleads with the technician at the TV station over the phone to take the commercial off the air, saying that everyone watching will die if it is allowed to air. The gas station attendant looks at him kind of funny as he shouts into the phone. Two children run inside to watch the commercial on TV at the gas station. Finally, the technician accedes to Dan's desperate request, and a "technical difficulties" sign appears on that TV station. The children switch to another station playing the commercial - it too goes off the air. They switch to a third station, and this time the commercial continues to play. The flashing jack-o-lantern appears and Dan continues to beg the technician to take the commercial off the air. Dan becomes ever more hysterical and screams to stop the commercial, as the commercial on the third station continues to run... and the movie suddenly ends on this cliff-hanger.