Paul Marsh is a wealthy stock market Tycoon in bad need of a vacation so, at the suggestion of his girlfriend, Barbara, they set out for the shores of Italy to explore the country where's Paul's family came from with the hopes of Paul learning more about his mother's hometown (which she always refused to talk about) while relaxing and taking in the sea air with their middle-aged friends Viki and Howard. Things are going well for them, the seas have been fine and though Paul has been plagued with frightening dreams of swimming with a beautiful black-haired, green eyed mermaid, everyone is having a grand time. Then, suddenly, as they are passing the little fishing village of Imbocca, a storm blows up, dashing the boat against the rocks.
Vikki is trapped in the bottom of the boat in her bedroom, her leg broken and bleeding, trapped between the rocks and some of the splintered boat. Paul and Barbara take a life raft ashore to get help for Viki while Paul stays behind to try to help her stave off blood loss and hypothermia. At the docks, Barbara's talent for speaking Italian comes in handy as a gruff fisherman gives them directions to the local hotel and, hopefully, a telephone where they can call for help.The town is eerily quiet as they reach the hotel, though Barbara is too focused on saving her friend to care. Once at the hotel, a sickly pale man informs Barbara that there is no phone at the desk and asks her to come to the back, offering Paul a room for he and Barbara to stay in until help arrives.
Paul accepts the room and heads upstairs only to find everything is disgustingly old and dirty in the room. Still, he waits there for Barbara. As he waits, he looks out the window and sees the streets filling with strange people, some limping, some grunting, all of them shouting in Italian, all of them not quite human, and all of them coming his way! He runs to his room door and locks it as best as he can, bolting it shut as the sounds of the villagers coming up the stairs can be heard. As the villagers turn the door handle, they realize the door is locked and begin to shout in an angry fashion as they pound on the door to break it down. Paul escapes though the bathroom window, falling through a thin roof, landing hard on a pile of unfinished leather.
Finding himself in a derelict warehouse/leather tannery, he pulls himself to his feet and begins to limp around, looking for the exit. While searching for the door he finds out what the villages are tanning: human skin! Terrified, Paul bolts towards the door as fast as he can with his hurt leg, only to have it slide open. Paul hides behind one of the stretched human skins as the villages limp, walk, shuffle and drag themselves in. Their pale, dappled skins and vacant eyes seem inhuman as do their harsh, gurgling voices.
Paul is forced to fight off several of the villagers who find him by lighting some of the skins on fire. As the villagers run to snuff out the flames, carrying away their precious human leather, Paul escapes by pretending to be a villager carrying out leather and flees down an alleyway. In the alleyway Paul is confronted by a drunk old human man. With a thick Italian accent he explains to Paul that he is the last Human in all Imbocca and tells Paul of the Rise of Dagon.
Long ago Imbocca was a great fishing port. Then, suddenly, one day the fish stopped coming in and nobody could find out why. The people prayed and prayed but no fish came. Then one day, a strange man come to the village and told the people of Imbocca that their god was a false god that had deserted them and that if they followed him, he would show them a REAL god who would answer their prayers. the people at first ignored the stranger, but, as money and food ran thin, a small handful of men followed the stranger to the sea to watch him ask his god, Dagon, for help.
The stranger put on a strange golden crown and stood by the sea, chanting a prayer in an alien tongue, calling upon Dagon for help. The next day, the shores were covered in seashells, starfish, and other items made of gold. The villagers couldn't believe their eyes! The town was rich and the fishing was good again, but the old man's parents didn't trust this new god and refused to share in the treasures from the sea. The stranger led the people of the town in killing their old priest and overhauling their church into a temple to Dagon. Now everyone was expected to worship Dagon and the entire town joined the stranger in his strange prayers... everyone except the old man and his parents, that is.The stranger, who had become the head of the temple to Dagon as well as the town mayor, noticed this lack of prayer and questioned the old man's parents in the church on it, demanding that they pray to Dagon. They refused and were killed. The boy was too frightened to speak, and so the temple head tore off the boy's cross necklace and blessed him in the name of Dagon before continuing the service.
One day the fish stopped as did the gold, and the people asked why Dagon has forsaken him. Was it because they were not praying enough? No, it was because Dagon wanted sacrifices. Women were to be given to Dagon, not to be killed, but to be mated with, so his children would populate the town. Over time, between the breeding with Dagon and his children and the blessings of Dagon, all of Dagon's followers became fish-like so that one day they could serve their master in the sea. As the only person of the town not either a child of Dagon by faith or blood, the old man had remained human and was now the last man in Imbocca. The only reason he was not killed and skinned was because the townfolk considered him just a harmless old drunk, and had decided to leave him alone as he was no threat.
Paul begins to panic realizing what will befall Barbara and Vickie, and begs the old man to take him to where they would be held to rescue them. The old man at first refuses, but eventually is persuaded to help. Using the old man as a stall tactic, Paul sneaks into the Mayor's manor where he is captured and is bound (along with the old man), and thrown into an old barn where he is reunited with Vickie and Barbara. Barbara is fine, but Vickie is shaken. When Paul asks why, Vickie mutters something half unintelligible about a strange creature attacking her in the boat, killing Howard and doing something to her. Paul is confused so the old man tries to put it gently to him.
"He... err... took her...", the old man slurs.
Paul still is confused.
"He... FUCKED her!", the old man says, frustrated, and Paul begins to look frightened.
Paul begins cutting the other loose with his pocket knife, succeeding just as their captors arrive. Vickie steals Paul's knife and holds it to her stomach, shouting that she is going to kill herself. Her captors try to talk her out of it, saying what an honor it is to be bearing Dagon's child, but Vickie is not swayed. She kills herself with the knife, and, in the confusion, Paul and the old man manage to kill one guard and subdue another before being recaptured by the guards' backup.
Paul and the old man are taken into a barn and chained where a cruel-looking man is sharpening thin skinning knives. He tells them what an honor it will be for them to die and be used as ritual masks. They both are given one last chance to repent and join their worship of Dagon. The old man spits in the skinner's face and begins to recite the Lord's Prayer. Paul also refuses. The old man is skinned alive, still praying, and bleeds to death. Paul is next, when someone comes up and tells the skinner not to kill Paul but to instead take him into the house. Peeved, the skinner obeys.
Paul is taken into the house and tries to scape again, fleeing down the hallways into the first door he can open, closing it behind him. In the dark there is a gasp as a lamp is turned on, revealing a beautiful woman who looks just like the Mermaid from Paul's dream! From the hallway there is a knock and a harsh gurgling voice asks if everything is OK as the girl's light is on and he heard her gasp.
The girl replies, "No, papa. I am fine. It was only a dream.", and there is the sound of someone limping away.
Paul tries to refuse her, but he finds her irresistible as she beckons him closer. The two begin to kiss until Paul uncovers her legs to reveal a set of squid-like tentacles. Horrified, Paul pulls away from her.
"No! Please... stay... stay with me! Please!!" she begs, calling out to him as he runs back down the hallway, writhing her tentacles as if reaching out to him.
Paul narrowly escapes the house pursued by the obviously inhuman villagers by hot wiring an old car, which ends up running off the road after hitting one of the fish men near an old house. Paul ducks into an old flooded house to hide only to find it occupied by a human-looking little boy. The little boy begins to shout in a language Paul doesn't understand an a HUGE, strong fish man comes up from the water to try to kill him as the boy cheers. The fish man tries to drown Paul in the toilet, and Paul retaliates by grabbing the cover to the back of the toilet and smashing it against the fish man's head. The fish man falls into the water, unconscious or dead, as the boy rushes to his side, begging him to get up.
Paul escapes into the town and begins to look for a way to rescue Barbara. Guessing that the villagers intend to sacrifice her, he finds a can of Kerosene and heads to the church. The church is empty, but a gust of wind alerts Paul to a hidden passageway. Paul descends deep into dark, wet tunnels where he finds fish men in human-skin masks dancing around an open pit with Barbara, wearing golden ceremonial jewelry and nothing else, is suspended by chains. after a few moments, the squid girl from the bedroom is carried in on an ornate stretcher by two fish men. The squid girl reveals herself to be a priestess and now is dressed in ornate ceremonial garb including the same headdress worn by the Stranger in the old man's story. The priestess begins to lead a chant to Dagon and Cthulu as Barbara is lowered into the pit which is revealed to contain murky black water at it's bottom.
Paul, taking a lighter from his pocket, runs out and begins to douse the fish men in kerosene, lighting them on fire with his lighter. They scream and run around in confusion, lighting each their on fire, while the priestess looks on in horror, begging Paul to stop. In the confusion, the winch lowering Barbara is let go of and she begins to swiftly plummet towards the murky water. Paul runs to the Winch, catching it, as he slowly begins to pull Barbara out of the water.
The Fish men, snapping out of their confusion, surround paul with knives, ready to kill him. From the back of the gathering, a large man with a heavy limp plods out with a crutch. He wears a human skin mask and has one leg as a tentacle. "Stop...", he says with the same voice as Paul heard from within the hallway, "He is... my son..."
"Long ago...", the priestess explains to Paul, "He was young and handsome for a man. He brought women to Imbocca... including your mother. You are my brother, now you will be my lover..."
Paul keeps cranking up the wench only to learn he got there too late. Now covered in a thick black substance, Barbara begs him to just let her die. At first he refuses, but the priestess begins to explain how Barbara is now part of Dagon, and so he lets Barbara go into the deep.
Turning to the priestess with eyes full of Anger, Paul douses himself in Kerosene and lights himself on fire. The Priestess shouts "No!", then leaps onto Paul, knocking them both into the water. Once underwater, gills open up in Paul's neck and sides. The priestess smiles, swimming around him just like the mermaid in the dream. Now realizing that he is one of them, Paul takes her hand, smiling, and swims with her into an intricately carved tunnel under the sea.
The screen fades to black and this quote appears.
"We shall swim out to that brooding reef in the sea and dive down through black abysses to Cyclopean and many columned Y'ha-nthlei, and in that lair of the Deep Ones we shall dwell amidst wonder and glory for ever."