The film opens with the playing of the National Anthem during a TV station's sign-off. The highly-pixeled image is from a close-up, magnified shot of a television screen. The picture goes 'dead' - it is in the middle of the night. The head of the household, Steve Freeling (Craig T. Nelson) has fallen asleep in the downstairs living room in front of the tube.
The family dog visits and introduces each of the members of the sleeping Freeling family in the upstairs bedrooms of their suburban home - thirty-two year old wife Diane (JoBeth Williams), sixteen year old Dana (Dominique Dunne), eight year old Robbie (Oliver Robins), and young, five year old blonde nursery-schooler Carol Anne (Heather O'Rourke).
The youngest daughter comes down the serpentine staircase from the second floor, walking through the flickering, strobe-effect lighting that is cast over the room. She sits in front of the fuzzy, snowy image of the television and imaginatively converses with strange entities - she believes that every inanimate object is anthropomorphic.
Carol Anne: Hello? What do you look like? Talk louder, I can't hear you! Hey, hello! Hello, I can't hear you! Five. Yes. Yes. I don't know. I don't know.
She awakens her parents and siblings, who stand in silence and watch her communicate with the grainy picture tube. She places her two palms on the glass.
They live in the peaceful Cuesta Verde Estates tract housing development - their house is indistinguishable from other subdivision homes. The bedroom of the two youngest children is decorated with other-worldly items - two Star Wars characters (R2D2 on the bedspread and a Darth Vader toy figure on the shelf), two related film posters, an Alien poster from the science fiction horror film, and CLUE - a classic who-dun-it board game. Various events signal the greater threats to come. The family's canary bird Tweety unexpectedly expires - strangely.
Diane: Oh shit, Tweety, couldn't you have waited until a school day?
The middle of a football game is suddenly switched to the 'Mr. Roger's Neighborhood' children's show. Steve opens the window next to the neighbor's house. Steve is having an on-going battle of 'remote controls' with his nearby neighbor Ben Tuthill (Michael McManus).
Steve: We've got a good game going on here.
Ben Tuthill: My kids wanna watch Mr. Rogers.
Steve: I don't care what you're watching Ben, just show a little mercy with that thing!
Ben Tuthill (flicks his remote): Move your set.
[Ben flicks remote]
Steve (flicks his remote): Move yours Ben.
Steve and Ben flick each other off.
Carol Anne saves Tweety from being unceremoniously flushed down the toilet. She carefully prepares a cigar box for its burial, adding items: a piece of red licorice . . .
Carol Anne: For when he's hungry.
A polaroid picture of Carol Anne, Robbie, and the family dog . . .
Carol Anne: For when he's lonely.
A yellow napkin . . .
Carol Anne: And for when it's nighttime.
Carol Anne: Now I lay me down to sleep, I pray the Lord my soul to keep.
Dana (sarcastically): Oh brother!
Carol Anne: If I shall die before I wake...
Dana (whispers to Diane): It did.
Carol Anne: ...I pray the Lord my soul to take.
Robbie: Hey Mom! When it rots can we dig up the bones?
At bedtime, a storm with thunder and lightning (signalled earlier by rolling cloud formations) strangely illuminates the gnarly, lifeless tree outside Carol Anne's and Robbie's window. Diane cautions her daughter about over-feeding the goldfish.
Diane: They grow up to be sharks!
Scared of the dark, Carol Anne wants the closet light left on. That same evening, Steve is watching a film in their bedroom: A Guy Named Joe. He's also rolling joints for Diane and reading Reagan:The Man The President. In the film, Spencer Tracy has just arrived in heaven and asked quizzically: "You mean this is for good?" Diane is smoking pot, getting high, reading a book on Jungian psychology and metaphysics, and pondering the dangers of sleep-walking.
Diane: Nocturnal somnambulism. You know what? You know what? I will bet you anything it's genetic. I mean, Carol Anne last night, and all last week, you know, and me when I was ten...You know, I once slept-walked four blocks. And I fell asleep in the back of this guy's car. He drove all the way to work before discovering me. Oh God, I woke up. I started screaming.
People came running from everywhere. They called the cops. The cops came. They took this poor dude downtown. My father...Big Ed has me examined for like bruises and hickies. Oh you name it. Oh God, I was so embarrassed. Oh shit, Steven, what if we, like, dig the pool, you know, and Carol Anne sleepwalks and she falls into it before there's any water?
A seemingly harmless, half-sized clown doll with a red bulbous nose and a malevolent grin sits in a chair in the middle of the children's room - it centralizes all Robbie's fears during the stormy night. He covers the doll with his jacket so its ominous stare won't scare him - the back of his jacket, with the Star Wars character Chewbacca, replaces the clown's grin.
Robbie (fearful): The storm is getting closer.
Robbie retreats to his parents' bedroom for reassurance. His father returns to his bedroom with him - the young boy is nervous that the tree may be alive:
Robbie: I don't like the tree, Dad.
Steve: It's an old tree. It's been around here a long time. I think it was here before my company built the neighborhood.
Robbie: I don't like its arms. (whispering) It knows I live here, doesn't it?
Steve: It knows everything about us, Rob. That's why I built the house next to it, so it could protect us...It's a very wise old tree.
Robbie: It looks at me. It knows I live here.
Both younger children eventually retreat to their parents' bed. Again, the television is left on - at 2:37 am, the National Anthem plays (accompanied by patriotic symbols of democracy in the nation's capital), followed by snowy static. Carole Ann crawls across the bed toward the inviting screen and positions herself in its flickering glow.
A eerie, mysterious, ghostly green strand of light emanates from the image - the TV screen becomes a gateway to the spirit world. The strip of light snatches out at her, snakes its way around the bed, and then blasts a beam of light at the opposite wall, burning a hole and creating violent shaking in the room. Carol Anne turns back at everyone and announces a warning . . .
Carol Anne: They're here.
The next day, as a bulldozer prepares to dig a hole for their swimming pool, the machine unearths the cigar box grave of the canary bird - a foreshadowing of the future. Steve believes there was a damaging 6.5 earthquake during the night.
Dana: Maybe the faultline runs just directly under our house.
Steve (on phone): Listen to me, Jeff! . . . No, I'm not kidding! . . . I know right, how can anybody sleep through a 6.5!