Meg Altman (Jodie Foster
) is searching for a new home with her 11 year-old daughter, Sarah (Kristen Stewart
), on the Upper West Side in Manhattan. They tour a luxurious, four-story brownstone and are shown, among other things, the master bedroom which houses an interesting commodity: a panic room. Lydia Lynch (Ann Magnuson
), the realtor, explains that the previous owner was a reclusive millionaire who built the hidden panic room as a safeguard against intruders. It's protected with four-inch walls and an impressive security system built in complete with a separate phone line and security cameras situated throughout the townhouse. However, despite Sarah's intrigue, Meg is apprehensive about the room. Still, pressured by the tight market and assured that the home will quickly close, Meg decides to move in right away. After some light unpacking and a pizza dinner, they settle in for the night. Meg checks her daughter's watch, designed to track her blood sugar and keep her type 1 diabetes in check, before retreating to her room to bathe and down a bottle of red wine, clearly distraught over the move and her recent divorce. She attempts to wire the phone system in the panic room but gives up and goes to bed as rain falls outside.
Later that night, three men break into the house. Junior (Jared Leto
), the grandson of the previous owner and Burnham (Forest Whitaker
), an employee of the security system with which the panic room was fitted, intend to steal the $3 million in bearer bonds stored in a floor safe inside the panic room. Burnham is distressed to see, however, that Junior has recruited a buddy of his named Raoul (Dwight Yoakam
) to assist in the heist. Burnham argues over Raoul's presence, saying that he knows nothing about him and the plan was for just two of them to quietly go in, get the money, and get out. His reservations are doubled, however, when the trio notice that the townhouse is occupied. Angry at Junior for failing to follow up on when the Altmans were supposed to have moved in and unwilling to continue the heist with people inside, Burnham threatens to leave. Junior persuades him that nothing bad will happen and convinces Burnham to stay and finish the job, reminding him that he needs the money more than any of them.
Meanwhile, Meg wakes up to use the restroom. When she returns to her room, she finds that she left the lights on in the panic room. As she goes to turn them off, she notices the activated security cameras and sees the three men downstairs beginning to make their way up the staircase. She runs to Sarah's room and pours water over her face to wake her before she leads her down the hall. They make it to the elevator just as Raoul catches up to them. As they descend, Junior shouts down to Burnham on the ground floor to intersect them but Burnham refuses to hurt anyone. Sarah reminds her mother of the panic room and Meg hits the emergency stop on the elevator, redirecting it to the top floor. They exit the elevator and run into the panic room and shut the door just as Junior enters the master bedroom. In anger, he kicks the mirror hiding the panic room door, breaking it. Raoul calmly tells him that's seven years' bad luck. When Burnham finds out that the Altmans are in the panic room, he sadly tells the others that there is no way to get inside now. As Junior panics, Burnham assures him that there's nothing the women can do. Cell phones won't work in the panic room and he knows the emergency phone line hasn't been hooked up.
Inside the panic room, Meg and Sarah discover that they have no way to contact the outside world for help. Feeling claustrophobic, Meg tries to calm herself and checks Sarah's watch before realizing that her glucagon syringes are outside and out of reach. The intercom system works and Meg threatens the men to leave or she will call the cops. However, Burnham makes it clear that he knows they don't have a phone and that they will not leave. Time passes and Meg continues to monitor the men through the surveillance system. Sarah peers through one of the bins inside the room, tossing aside blankets and things until she finds a flashlight. She lies on her stomach facing a vent allowing fresh air to circulate into the room from outside and puts the flashlight into it, turning it on and off in Morse Code for SOS. The light makes it across the alley into an adjacent apartment where a man (Andrew Kevin Walker
) is sleeping. He soon stirs and gets up to see the light but, even when Meg and Sarah try to scream for help, he dismisses them and shuts his blinds.
Meanwhile, Raoul and Junior attempt to tunnel into the panic room from the floor below with a sledgehammer but Burnham reminds them that they'll never get through the 4 inches of steel surrounding the room. Knowing that the women won't come out of the panic room themselves, Burnham devises a way to force them out. He retrieves a propane tank from the patio outside and attaches a garden hose to the nozzle. Picking up on the plan, Raoul uses a sledgehammer to break through the drywall in the master bedroom. Burnham breaks into the main ventilation pipe and feeds the hose into it, allowing just enough gas to filter into the room that Meg can smell it. His intent is just to send the women a message but Raoul becomes impatient and feeds more gasoline. Meg begins to cough but Raoul refuses to let up. Meg attempts to block off the vents with duct tape but the gas still seeps through. Desperate, she finds a lighter in the room and covers Sarah and herself with fireproof blankets before extending the lighter into the ventilation shaft. Hearing the ominous clanking of the lighter against the vent, Junior presses his ear to the wall as Burnham and Raoul back up. Meg ignites the gas and the explosion knocks her to the ground as the fire follows the path of the gas back into the room, severely burning Junior and propelling the propane tank into the far wall.
Angered and in pain, Junior looks for medicine and argues with Raoul on his way downstairs. Burnham is kept out of their conversation and Raoul demands more money for his share in light of what's happened. As they argue and as Meg watches them from the surveillance cameras, she realizes that she can probably retrieve her cell phone from the bedroom and make it back before they notice. With Sarah watching, Meg opens the door and runs out to the bedroom, grabbing her phone but knocking over the lamp on the night stand. Burnham sees the light flicker from his point on the stairs and the men race back up to the room in time to see Meg dive back into the panic room. Junior panics when he sees that Meg has a cell phone but Burnham reminds him that cell phones won't work in there. Meg finds this out the hard way until she discovers that she can hardwire the house line to the emergency phone line in the room. She manages to reach into the circuitry and tap the main line as Burnham, having seen the wire disappear from the outlet in the bedroom, races downstairs to cut the line. After being placed on hold by the police, Meg follows her daughter's suggestion of calling her ex-husband, Stephen. Stephen's girlfriend (Nicole Kidman
) picks up inciting a hostile reaction from Meg. She is finally able to speak to Stephen for just a moment before Burnham cuts the line. Meg remains resolute that Stephen will help them but Sarah is not convinced. She then confesses to her mother that she's been feeling dizzy and hungry.
As Meg pilfers through the bin for something with sugar, Junior goes downstairs. He lets slip to Raoul and Burnham that there is actually more money in the safe than he initially told them but that it's not even worth it now and he wants to leave. Raoul pulls out a gun and threatens Junior, to Burnham's indignation. Junior refuses to follow through with the heist, so Raoul shoots him in the head. Meg witnesses this from the surveillance cameras and hides the view from Sarah. Raoul then threatens Burnham to complete the job just as someone walks into the house. Meg watches, horrified, as Stephen (Patrick Bauchau
) is brought into the main room at gunpoint and fails to hide this fact from Sarah. In view of the cameras, Raoul begins to beat up Stephen and Burnham tries to tell Meg that it will stop if she leaves the room. Helpless, Meg cradles Sarah and screams in frustration until Sarah's watch beeps in alarm. Her blood sugar dangerously low, Sarah suffers a seizure. Her seizing eventually subsides and Sarah is left in a semi-conscious state. Raoul and Burnham then use Stephen's unconscious form to trick Meg out of the room. Already desperate for Sarah's medicine, Meg resolves to leave. She finds Sarah's medicine pouch as Raoul and Burnham enter the panic room. Meg returns and struggles with Raoul who is thrown into the panic room. Burnham shuts the door as Meg throws Sarah's medicine pouch inside. Raoul's hand is crushed in the sliding door and he loses his gun. Meg is able to retrieve it and she activates the two-way intercom system to beg the men to let her give her daughter an injection. Burnham refuses to open the door, afraid that Meg will shoot them, so Meg demands that he give Sarah the injection himself. He agrees, but only if she'll leave the room. Raoul shouts out that if Meg calls the police or if she tries to leave the house, he will kill Sarah. Meg leaves and runs downstairs where she finds Stephen. He is alive but badly injured, so Meg props him up in a chair.
Raoul manages to extract his hand from the door and sits in agony as Burnham opens the medicine pouch and follows Sarah's instructions to give her the injection. Burnham explains that it wasn't his intent to harm anyone and that he only wants a brighter future for his son. He tells Sarah that she and her mother weren't supposed to be here tonight. Once he is complete, he tells Meg over the intercom that Sarah will be all right. Then, he opens his duffel bag and removes a contraption that he uses to access the safe in the floor of the panic room. He gets the safe open and removes over $22 million in bearer bonds.
Suddenly, the doorbell rings. Raoul and Burnham see that the police have arrived. Stephen admits that he called the police before coming over. Knowing that the intruders are watching, Meg calms down and answers the door, acting as though she just woke up. The Officer Keeney (Paul Schulze
) tells Meg that he and Officer Morales (Mel Rodriguez
) are responding to an earlier call and a neighbor's complaint about shouts coming from her home. Meg lies to the officers and convinces them to leave, although Keeney suspects something. He goes so far as to suggest that Meg can't speak right now and assures her that they will remain in the area, but Meg laughs him off and shuts the door.
With the police gone and Meg briefly out of sight, Raoul and Burnham leave the panic room with Sarah in tow. They walk downstairs where they come face to face with Stephen in his chair and a gun in his hands pointed at them. He demands that Sarah be released but Raoul refuses. Stephen shoots and misses as Meg comes down on Raoul from upstairs with a sledgehammer. She knocks Raoul over the bannister where he falls and breaks his leg as Burnham runs out to the patio with the bearer bonds under his arm. Hardly disabled despite his broken leg, Raoul attacks Meg and overpowers her. Sarah jumps on his back and stabs him in the neck with her syringe but Raoul knocks her off violently. Sarah crawls into the fireplace, screaming as Raoul grabs his sledgehammer and threatens to crush Meg with it. However, a shot rings out and Raoul falls over dead. Meg looks to see Burnham standing over her with Raoul's gun. He tells Meg that they'll be alright now before leaving. However, as soon as he walks outside into the alley, he is surrounded by SWAT team members and forced at gunpoint to raise his arms. He does so and the loose bearer bonds fly out of his grasp with the wind and out of sight.
Stephen recovers and Meg and Sarah are soon left searching for another home together as they heal from their ordeal. Sitting on a park bench together, Sarah suggests a nice, simple apartment and Meg smiles in agreement.