A man named Frank Cotton buys a puzzle box called the Lament Configuration. It supposedly allows anyone who figures the puzzle out a transportation to a land of paradise. However, when Frank solves the puzzle, he summons the Cenobites, sadomasichist demons who torture others for pleasure. They rip Frank apart using hooked chians and then transport him to Hell.
Eventually, Frank's house becomes the possession of his brother, Larry, who inherits the house after Frank disappeared. Larry and his family begin to start a life in the house, not knowing Frank died there, but Julia, Larry's British wife who had an affair with Frank, discover's the attic where Frank was killed, but not a speck of blood in sight. Coincedentally, Larry cuts himself on a nail and comes to the attic for help. And after drops of blood hit the attic flooroards, Frank's soul uses the blood to partially regenerate his body and escape from Hell.
Julia discover's Frank in the attic later on, but only as a partially muscled skeleton. Frank tells Julia to lure men back to her house so that he may kill them and drain them of their blood to fully regenerate his body. Julia does with several men and Frank gradually regenerates to his normal self (which is strange seeing as it only took a little blood to start with). However, Kirsty, Larry's daughter and Julia's step-daughter, sees a man being lured by Julia into the house. When Kirsty goes inside to investigate, she discovers about Frank and the puzzle box (which Frank had held onto this whole time). Kirsty steals the puzzle box and escapes the house, only to be taken to a hospital, in which the doctors don't believe her about her dead uncle returning to life.
Kirsty then decides to use the puzzle box herself to see what happens, but like Frank, the Cenobites appear to take her to Hell. The Cenobites, consisting of Chatterer, Butterball, Open-Throat and the leader, Pinhead, tell Kirsty they are from a land where pain and pleasure are one, and that she must join them there. However, Kirsty tells Pinhead that she knows where Frank is and that she'll lead them to him if they spare her. Pinhead agrees but if Kirsty double-crosses him, the Cenobites will "tear her soul apart".
Kirsty then runs home and finds Larry, who tells her that Frank has been stopped. Kirsty goes to the attic to find a skinless corpse, assuming it must be Frank, but then the Cenobites arrive again, demanding that they find the person who killed Frank. Kirsty goes to warn her father but discovers that Larry is in fact Frank, who had killed her father and skinned him so that he may wear the skin and escape Pinhead. Frank then tries to kill Kirsty but ends up killing Julia instead accidentally and chases Kirsty into the attic, where the Cenobites are waiting. Pinhead then summons hooked chains to stab Frank and keep him suspended as they transport him back to Hell. But after Kirsty thinks it's all over, the Cenobites break their deal and try to transport Kirsty too. Kirsty then leaves the house and uses the Lament Configuration to send Pinhead and the other Cenobites back to hell.
After Kirsty escapes the house that burns to the ground, a homeless man (that had been appearing throughout the film) picks up the puzzle box and tranforms into a skeletal demon, flying away to transport the box back to the original shopkeeper who sold Frank the box in the beginning. The shopkeeper then sees a new customer, and asks "What's your pleasure?"