Several months after the death of Seth Brundle, his lover Veronica is giving birth to his son at Bartok Industries, the company that funded Brundle's experiments. The labor is very painful, and her accomplice Stathis Borans is dragged away from the procedure after he objects to her treatment. She eventually gives birth to a larval sac, causing her to go into shock and die. The larval sac is opened by the surgeons to reveal a seemingly normal human baby inside.
The baby is named Martin by the scientists. He begins to age much faster than a normal human; the company's CEO, Bartok, tells him that this is due to an extremely rare disease called "Brundle's Accelerated Growth Syndrome", caused by inherited mutant DNA from his father (hence the disease's name). Martin is just as much of a genius as his father, and Bartok wants him to finish the work Seth started. One day, Martin sneaks into a room where animals are held for testing, and befriends a Golden Retriever. He slips out of his room one day to bring the dog some of his dinner, but he finds that it has been transferred to another section. Martin goes there to discover a new set of Telepods, like the ones his father invented; his dog is being prepared for teleportation. The scientists send the dog through, but it unfortunately emerges as a hideous mutant, biting off a scientist's fingers. A horrified Martin screams, as Bartok consoles him.
Five years after Martin's birth, he is now physically 20 years old. He is taken to a new living space, which is much more luxurious and wide open. Bartok also tells Martin that he wants him to fix the Telepods; as Martin saw with the dog, they are unable to properly teleport anything, even inanimate objects like apples. Bartok assures Martin that the dog didn't suffer long, and apologizes for it. Martin is still skeptical about working on the Telepods, but Bartok gives him videotapes of his father being interviewed by Veronica to watch. On the tapes, Seth says that the teleportation somehow invigorated him and gave him more energy (though he was unaware of his eventual mutation at the time). Seeing this, Martin begins working on the Telepods.
Martin eventually manages to send a telephone through the pods with no ill effects, but he quickly decides he needs organic matter to transmit. He befriends another Bartok employee, Beth, and tries to send a cactus she owns through the Telepods. It comes out heavily damaged. Beth then invites Martin to have dinner with her, and he agrees.
One day, Beth takes Martin to a party in the Genetic Research area. He overhears someone talking about a hideous mutant the company has kept alive for two years. Martin slips away from the party and goes down to see it, discovering to his horror that the mutant in question is the Golden Retriever from his childhood. Outraged, Martin slips into the holding pen where the dog is to visit it. The dog is initially hostile, but it soon realizes who he is and relents. Martin sits and pets his dog for a while, before taking out some chloroform and putting it to sleep. The next day, Bartok asks Martin about a break-in at Genetic Research, which Martin denies knowledge of. Bartok realizes he is lying, and theorizes that Martin will become just like him eventually.
Martin invites Beth to watch him teleport a kitten. While she initially reacts with horror, she is relieved when the kitten goes through unharmed. Later that night, Beth and Martin make love. The morning after, Beth notices what appears to be an open sore on Martin's arm. Theorizing that this is from the mutant DNA Bartok told him about, Martin asks the computer what can be done. It tells him that the mutant DNA can be replaced with healthy DNA from another donor, using a gene-swapping program built into the Telepod computer. Martin rejects this idea when he sees such a process would turn the donor into a horrific mutant.
Martin notices the sore on his arm is secreting a sticky, web-like fluid. When Bartok finds out, he realizes that Martin will soon become a human/fly hybrid like his father. Beth then discovers she is denied access to Martin's work area, and is told that the company taped her and Martin in bed. She tells Martin, who angrily trashes his living area and eventually discovers the hidden camera inside. He destroys it and breaks into the surveillance area, discovering that every moment of his life has been secretly taped. He then runs into another tape of his father, this time in the initial stage of mutation, recounting how a fly had gotten into the telepod with him. Realizing what is happening to him, Martin escapes from Bartok's facility and goes to see Beth at her houseboat.
Bartok's scientists attempt to activate the telepods, but they quickly discover that Martin has installed a password system (the computer asks for "the magic word"). If the wrong password is entered, the computer will use a tapeworm virus to completely wipe its memory. Realizing that Martin must be brought back, Bartok's henchmen chase him and Beth, who go on the run. The two visit Stathis Borans, now a reclusive drunk, who theorizes that a cure for Martin's condition involves the Telepods. He gives them his car, and they check into a motel for the night. Martin's transformation quickly becomes too much for Beth to bear, and she surrenders the two of them to Bartok.
A now-cocooned Martin is brought back to Bartok Industries, while Beth is interrogated about the "magic word". After some time, Martin's cocoon bursts open and reveals a human/fly hybrid-- Martinfly. Unlike Martin's father, who was a sickly, deformed mutant, Martin's transformed form is extremely deadly, likely owing to Martin having been born with fly genes rather than being fused with them. It goes on a rampage throughout the facility, killing several security guards. However, a trace of Martin's humanity remains intact; the creature simply strokes a guard dog sent to locate it, and also refuses to harm Beth when it encounters her. Eventually, it breaks into the Telepod bay, grabs Bartok, and uses his hands to type in the "magic word"-- Dad. The gene-swapping program boots up, and the telepod door opens.
Martinfly drags Bartok into the telepod with it, and uses Bartok's hands to gesture at Beth, telling her to activate the teleportation sequence. Over Bartok's objections, she activates it, and Martinfly and Bartok are teleported just as security breaks into the area. Bartok emerges from the pods as a horrible mutant, but Martin is transformed into a normal human again. An exhausted Martin assures Beth that he is okay, and they embrace.
Later, the Bartok mutant suffers an ironic fate; it is placed into the same area Martin's mutated dog was, doomed to messily eat grue through its dying days. As the mutant crawls to the bowl of food, it notices a fly crawling on the rim of the bowl. With this shot, the film ends.