Teenagers Nancy, Quentin, Kris, Jesse and Dean are all neighbourhood friends who begin having the same dream of a horribly disfigured man who wears a tattered sweater and a glove made of knives. The man terrorises them in their dreams, and the only escape is to wake up. But when, one by one, they start dying violently, the friends realise that what happens in the dream world is real, and the only way to stay alive is to stay awake.