Plagued by a series of violent nightmares, Karen decides to admit herself to a posh recovery resort known only as "The Colony," run by her eccentric New Age therapist Dr. Wagner (Patrick MacNee), and brings along her husband Bill (Christopher Stone) for support. The night after they arrive, Karen and Bill are unnerved by eerie howling in the woods.

Back in the city, Karen's coworkers Chris (Dennis Dugan) and Terry (Belinda Balaski) have been investigating Eddie's background after discovering that his body has disappeared from the morgue. Sifting through Eddie's possessions, they find a strange collection of artwork depicting wolf-like creatures, and decide to consult with Walter Paisley (Dick Miller, of course), the owner of an occult bookshop, on werewolf lore. Though he claims not to believe in the stuff he's selling, Paisley nevertheless convinces Chris to purchase a handful of silver bullets... just in case.

Back at the colony, Dr. Wagner has organized a hunting party after hearing Karen's account of the nocturnal howling, but the men find nothing but a rabbit, which Bill is told to bring to the cabin of the sultry Marsha (Elizabeth Brooks) to prepare for dinner. After resisting Marsha's less-than-subtle sexual overtures, Bill is attacked by a wolf while returning to his cabin. The following moonlit night, the sleepless Bill wanders outside to find Marsha waiting and the two make love by the campfire, their bodies undergoing a frightening transformation.

Just as Karen is beginning to suspect that her husband is hiding a secret far more threatening than marital infidelity, Chris and Terry have come to realize -- too late, in Terry's case -- that Eddie Quist is not only still alive, but not quite human... and he knows he's being followed. Chris arrives at the colony too late to save Terry, but manages to find Karen just as the colony's residents -- all of whom are werewolves, including Dr. Wagner -- are assembling to decide her fate.

Dante fills his film with heartfelt homages to The Wolf Man and other classic horror movies, as well as a few clever visual puns and in-jokes from his tenure with Roger Corman, but never strays from the path to genuine horror, particularly when Rob Bottin's chilling monsters are onscreen.