Dream demon Freddy Krueger is resurrected from his apparent demise, and rapidly tracks down and kills the remainder of the Elm Street kids. However, Kristen, who can draw others into her dreams, wills her special ability to her friend Alice. Alice soon realizes that Freddy is taking advantage of that unknown power to pull a new group of children into his foul domain.

It’s been many years since Freddy Krueger’s first victim, Nancy, came face-to-face with Freddy and his sadistic, evil ways. Now, Nancy’s all grown up; she’s put her frightening nightmares behind her and is helping teens cope with their dreams. Too bad Freddy’s decided to herald his return by invading the kids’ dreams and scaring them into committing suicide.

A new family moves into the house on Elm Street, and before long, the kids are again having nightmares about deceased child murderer Freddy Krueger. This time, Freddy attempts to possess a teenage boy to cause havoc in the real world, and can only be overcome if the boy’s sweetheart can master her fear.

Teenagers in a small town are dropping like flies, apparently in the grip of mass hysteria causing their suicides. A cop’s daughter, Nancy Thompson (Heather Langenkamp) traces the cause to child molester Fred Krueger (Robert Englund), who was burned alive by angry parents many years before. Krueger has now come back in the dreams of his killers’ children, claiming their lives as his revenge. Nancy and her boyfriend, Glen (Johnny Depp), must devise a plan to lure the monster out of the realm of nightmares and into the real world…