After the confrontation in Hellraiser II, the Cenobite named Pinhead is trapped, along with the puzzle box, amongst the writhing figures and distorted faces etched into the surface of an intricately carved pillar - the Pillar of Souls. The pillar is bought by the rich and spoiled J.P. Monroe (Kevin Bernhardt), owner of a popular nightclub called The Boiler Room. An ambitious young television reporter, Joey Summerskill (Terry Farrell), slowly begins to learn about Pinhead and the mysterious puzzle box. She is introduced to the pain the box can bring when she views a teenage club-goer being ripped apart by the box's chains in a hospital emergency room. She tracks the box and a young woman named Terri (Paula Marshall) to The Boiler Room, from which Terri had stolen the puzzle box.
Through video tape interviews with Kirsty Cotton recovered from the Channard Institute, Joey and Terri learn about the demonic Cenobites and the power of the Lament Configuration, the only means of sending Pinhead back to Hell. Pinhead remains dormant until one night several hooked chains shoot out of the pillar and rip into one of the club goers, Brittany Virtue (Sharon Percival), Monroe had recently slept with. After killing her she is absorbed and her face appears on the pillar. Pinhead convinces Monroe to bring him club members so he can feed on their blood and be freed from the pillar.
Now more dangerous than ever before, since he has been separated from his human self - a World War I British Army officer named Elliot Spencer who takes Joey on a walk round a trench filled with the corpses of what are presumably his men, explaining the nature of himself and Pinhead - and is simply the manifestation of Elliot's dark side and no longer under the control of Hell and purely out to cause chaos and destruction (in the previous movies the Cenobites were creatures of order, not chaos). Pinhead slaughters everybody in The Boiler Room, creating several new Cenobites in the process. Pinhead sets out to destroy the puzzle box so he need never return to Hell again. As time runs short, Joey must think of a plan to bring Pinhead and his newly-created Cenobites back to the realm of Pinhead's human self or else doom both herself and the mortal world to an eternity of pain and suffering.
A young, rich club owner, JP Monroe, stops in an art dealer's shop. As he looks around he notices a large, plaster column with several relief sculptures on it, mostly of humans contorted in pain. Also on the column is a small sculpture of a puzzle box. The owner of the shop approaches him and sells the piece to JP, telling him to "take pleasure in it."
At a hospital emergency room, a young TV reporter, Joey Summerskill, is doing a piece on the abilities of the staff, however, the ER is strangely vacant that night. Suddenly, a man is wheeled inside the ER on a gurney. Sharp hooks at the ends of long, bloody chains are embedded in his flesh. As he passes Joey, the man whispers, "Help me." A young woman follows after him, hysterically chattering about his condition. Joey interviews her briefly and the woman tells her that she & the man came from a club called The Boiler Room. When the doctors and nurses try to treat him, the chains are suddenly lifted by an unseen force, tearing at his flesh, and the man screams in pain. As the doctors and the young woman watch horrified, his head explodes. Before she leaves, the young lady retrieves a small puzzle box the man had been holding. She asks for the young woman's name and finds out it's Terri.
Joey is ultimately bored with her job; she's only given puff pieces to report on. She also experiences nightmares about her father, who'd died in the Vietnam War.
She goes to the Boiler Room and asks about Terri, who turns out to be JP's former girlfriend. They tell her that she's out with JP at a restaurant. Joey finds JP there & gives him her card, asking to call if he sees Terri. JP tries to hit on her but she rebuffs him. Later, Joey wakes up from another nightmare and receives a phone call from Terri & invites Terri to her apartment. Terri shows Joey the puzzle box, which allows anyone who solves it to experience a strange realm of Hell. Terri concludes that the man who died in the ER must have stolen the puzzle box from the sculpture JP had recently bought.
At the Boiler Room JP, a self-absorbed and cruel man, examines the sculpture he'd bought. JP finds a hole in the column where the puzzle box had been. JP reaches into the hole and a rat bites him on the hand, drawing blood. JP's blood splatters across the column and is inexplicably absorbed into it. JP is fascinated. Later, while slyly watching the women who come to his club, he spots a lovely blond girl at the bar and has one of his employees give her a single rose, an invitation to meet with him privately. He lures the girl to his apartment, attached to the club, and has sex with her. As he does, the sculpture shows slight signs of animation. After he's finished with the woman, he harshly tells her to leave his apartment, having only wanted her for pleasure. Angry at being spurned, she begins to berate him for being such a cad when hooked chains emerge from the sculpture and snare her skin. She's forced to turn around and face the pillar. One of the faces, belonging to the Cenobite Pinhead, suddenly comes to life and hooks her forehead with another chain. Her skin is yanked from her body in a single jerk and as she screams, she's swallowed into the sculpture. JP is horrified but listens intently as Pinhead tells him he can grant JP all the pleasure, wealth and fame he seeks if he'll supply the statue with fresh blood and flesh. JP is unconvinced and shoots at Pinhead with a pistol; the shots are useless -- Pinhead spits the bullets out effortlessly. JP promises to bring what Pinhead asks for.
Joey continues to be plagued by the nightmares about her father. She also continues her investigation into the young man who died in the ER and JP's club. Her efforts continue to be fruitless. She also receives news that she's been offered a job in another city -- since she and Terri had struck up a mild friendship, Terri is upset and leaves Joey's apartment after receiving a call from JP, who asks her to come back to him.
At JP's apartment, JP tries to talk Terri into starting up their romance again. Terri is very reluctant but still starts to fall for JP's charms. As he talks to her, he walks her closer to the pillar, suddenly grabbing her and trying to force her even closer to it. Pinhead's face suddenly comes to life and growls and Terri retreats. When JP tries to grab her again, she hits him in the face with a set of brass knuckles. He falls on the floor unconscious. Just as Terri is about to leave the room, Pinhead stops her, demanding she give him JP's body. She pushes his limp body closer to the pillar and watches in horror as JP is hooked and yanked into the pillar. The sculpture explodes, tossing bits of flesh around and Pinhead emerges, free of his prison. Terri is too frightened to retreat.
Terri has another nightmare about her father while he fights in a battle in Vietnam. This time, she's confronted by a young British man in an army uniform. He identifies himself as Captain Elliott Spencer, a World War II veteran, whom, after the war, had acquired the puzzle box in the Far East after the war and had discovered, while trying to solve it, that it was a doorway to an alternate world much like Hell, where wanderers can experience the extremes of pain and pleasure. Spencer had unlocked the doorway and had eventually become a demon of the netherworld, subjecting thousands of victims to extreme torture. He'd also had several demon assistants who'd themselves been victims of the puzzle box. Having been challenged previously by a young woman, Kirsty Cotton, who's own father had been a victim of her crooked uncle, Pinhead was banished and his accomplices were destroyed. Joey learns of the box's power by watching a videotaped interview with Kirsty taken from the Channard Institute, where she was held as a psychiatric patient.
Spencer himself wants to regain his human form and asks Joey to help him. He wants her to, using the puzzle box, lure Pinhead into the spirit realm Spencer currently lives in so he can capture him and break his curse. Joey agrees.
Back at the Boiler Room, Pinhead bursts into the club and begins to torture, mutilate and kill the club-goers. Joey sees a news report on the carnage and calls her cameraman, Doc, who tells her he'll meet her there. When Joey arrives, Pinhead has finished his rampage. Joey runs from the club, chased by Pinhead. In the streets, she sees an odd-looking man approaching her: Doc has been turned into a Cenobite with a camera embedded in his head where his right eye used to be. Escaping Doc and another Cenobite -- the DJ from JP's club, who makes use of compact discs as weapons -- she retreats into a church. A priest meets her and doesn't believe her fantastic story about "demons." Pinhead suddenly bursts into the church, shattering its stained-glass windows and melting the priest's steel cross in his hand. Over the priest's loud protests, Pinhead tortures the priest, forcing him to eat entrails plucked from his chest.
Joey taunts Pinhead with the box and flees the church. In a nearby construction site she meets two more Cenobites: the first is JP, who has two drilling devices thrust through his head. The other is Terri, who wields sharpened hook blades and has a cigarette jutting from her throat. They are about to torture her when Pinhead stops them, demanding Joey give up the box. The box activates and Joey is sent to Hell with the Cenobites. In the alternate dimension, Joey meets her father. He asks for the box to break the spell and reveals himself to be Pinhead in disguise. He prepares to torture and transform her into a Cenobite when Elliott Spencer appears and forcibly fuses himself with Pinhead. While Pinhead is distracted, Joey stabs him with the reconfigured box, destroying him and restoring Spencer's humanity. The box remains and Joey drops it into a foundation block of the construction site. She walks away, believing that the terror is over. The building is constructed; the lobby features an elaborate decor of the box itself.