Late at night inside a theater, a troupe of actors are rehearsing a musical about a mass murderer known as the Night Owl. When the show's leading lady Alicia sprains her ankle, she and the wardrobe mistress Betty sneaks out of the rehearsal for medical assistance in which the closest medical facility is a mental hospital. When speaking to the psychiatrist, Betty notices a imprisoned patient who is revealed to be Irving Wallace, a former actor who went insane and committed a killing spree. Unbeknownst to any of them, Wallace killed one of the attendants with a syringe and sneaked out of the asylum, hiding in the back of Betty's car. Once they arrive back at the theater, the director Peter fires Betty for leaving during rehearsal. As she packs her things and gets ready to leave, Betty returns to the car only for Wallace to murder her with a pickaxe. Moments later, Alicia then emerges from the theater upon the discovery of her friend's corpse. Later, police officers arrive to remove the scene and stations two officers in the parking lot to keep an eye on the premises.
Meanwhile, the director creates an idea by altering the play's script; he renames the show's antagonist to Irving Wallace instead of an ambiguous killer, and insists that everyone stay the night to begin immediate rehearsals with the new material, resulting one of his actresses Corinne hide the theater's key so nobody can leave. With the promise of additional cash, the group reluctantly agrees. Inside the dressing room, Laurel feels someone's inside and locks the door; she then screams when someone tries opening it and calls the group to her assistance. Peter accuses Brett as the culprit, but he refuses to accept.
Unbeknownst to the group, Wallace himself has donned the theater's owl costume. While Alicia keeps searching for the key, Wallace arrives (with Peter thinking it's Brett) for the scene and strangles Corrine before stabbing her. Without the key's whereabouts, the group begins to panic and tries to contract the outside policemen. Wallace then disconnects the power source and telephone lines the power source and the telephone lines in addition for no escape. The group finds an escape route, but Ferrari gets separated. On the stage, Wallace sees Ferrari who begs and pleased to give him the money, but Wallace refuses and stabs him, later hanging his body upon the group's discovery. Peter and Danny leave Alicia, Mark, Sybil, and Laurel inside a room and searches for Wallace. Laurel notices Wallace outside opening the door and with the assistance of Mark, Alicia, and Lauel, barricades the door. When Wallace breaks the window and grabs Mark, he kills him with a power drill through the door, gaining the attention of Peter and Danny. They plan that everyone must defend themselves and to stick together. Peter notices someone walking on the attic, causing him to head upstairs where Alice and Laurel follow as well. In the process, Alicia is accidentally knocked unconscious after Laurel pushes her down. Arriving at the attic, Peter arrives with an felling axe and instead accidentally hacks up Brett, tied up with the costume on. Suddenly, a standing Sybil is pulled down by Wallace. Despite the help, she is killed by disembowelment. Danny immediately goes down before getting killed by Wallace with a chainsaw. During the escape, Peter accidentally pushes Laurel into Wallace's chainsaw and wounds her. Wallace severs Peters arm before his chainsaw runs out of fuel. Taking the axe, Wallace then decapitates Peter.
Alicia wakes up and finds a wounded Laurel. They both hide in the shower room as Wallace approaches near them, before Laurel is stabbed by Wallace. Finding an exit, she arms herself with a pistol and searches for the key, only to see Wallace sitting with the group's corpses placed around the stage. Underneath the stage, she successfully finds the key (catching Wallace's attention) before getting attacked by Wallace. With the pistol having no ammunition, she stabs a screwdriver into Wallace's eye and runs to the door. Nearly missing his attacks, she heads up the attic catwalks where she reaches a dead end as Wallace corners her. After spraying a fire extinguisher at Wallace, he climbs up a dangling cord where Alicia servers the cord with his axe, causing Wallace to fall. She makes her way to the door, where Wallace attacks her before she dumps a burning bin to him, burning him. She successfully escapes the theater via unlocking upon the police assisting her. While being interviewed, she then sees her deceased friends being delivered outside.
The next morning, Alicia returns to the theater and finds her missing watch, which was lost during the fight with Wallace. Finding out that eight bodies instead of nine were recovered, a burnt Wallace appears and attacks her with his axe before getting shot by Willy. As the credits roll, Alicia leaves the theater, unknown to her that Wallace has survived his gunshot and smiles to the camera.