Ray Peterson is home on a week-long vacation. Late one night, he hears strange noises emanating from the basement of his new and rather odd neighbors, the Klopeks. Eventually, Ray, and his neighbors Art Weingartner and Vietnam veteran Mark Rumsfield gradually suspect the Klopeks may be ritualistic murderers.
On another night, Ray, Art, and Mark observe the youngest Klopek carting an over-sized garbage bag from the garage to the curbside garbage can, where he aggressively mashes it down with a hoe. Ray has also seen the Klopeks digging in their back yard during a rainstorm. The following morning, Ray, Mark, and Art search the garbage truck for human remains after the Klopeks' trash can is collected, but find nothing.
Bonnie (Mark's wife) finds their neighbor Walter's dog, Queenie, running loose. Worried about the elderly man, Ray, Art, and the Rumsfields, along with Ricky Butler, a teen neighbor whose parents are away, go to Walter's house. Inside, they find overturned kitchen chairs and Walter's toupee, but no Walter. Ray collects Queenie and leaves a note in case Walter returns and spots another Klopek for a brief moment. That night, Ray and Art theorize about Walter's mysterious disappearance, believing the Klopeks may have used him as a human sacrifice. When Vince (Ray's dog) brings home what looks like a human femur bone, they are further convinced.
Ray's wife, Carol, tired of her husband's and his buddies' behavior, organizes a welcome visit for the Klopeks. The Petersons and Rumsfields meet Hans, Reuben, and Dr. Werner Klopek. Meanwhile, Art (not invited) snoops around the Klopeks' backyard. After, Ray reveals to Art and Mark that he found Walter's mail and his toupee at the Klopeks’, proving the family was inside Walter's house. The trio agree to search for Walter's body in the Klopeks' backyard while they are away the following day.
Ray sends Carol and their son, Dave, to visit Carol's sister, freeing Ray and his buddies to explore the Klopeks' residence. Art and Ray dig for Walter's remains in the backyard, while Mark stands guard. When nothing incriminating is found, Ray and Art break into the basement and discover what appears to be a crematorium.
The Klopeks return home, accompanied by the police after having seen the lights on in their basement. Art goes to fetch Ray, who, digging into the basement's earthen floor, discovers what he believes is a buried crypt. He realizes too late his pick-ax has struck a gas line. Art escapes before the house explodes with Ray still inside. A disheveled and scorched Ray emerges from the flames just as Carol returns home.
Walter arrives home during the commotion. He has been in the hospital and had asked the Klopeks to collect his mail while he was away. After Ray had earlier slipped Walter's toupee into the mail slot after absentmindedly putting it into his pocket, it was mistakenly gathered up with the mail. That is why it was in the Klopeks’ house. Ray declares he and the others were wrong about the Klopeks before climbing into the ambulance to go to the hospital.
Werner Klopek enters the ambulance. Ray apologizes to him, but Werner accuses Ray of having seen the human skull in the basement furnace. He reveals they murdered the previous owners, confirming everyone's suspicions. Werner attempts to lethally inject Ray as Hans drives the ambulance away. As Ray and Werner struggle, the vehicle crashes into the Weingartners' house, ejecting both Werner and Ray, who then makes a citizen's arrest. Ricky uncovers human skeletal remains in the Klopeks' car trunk. The Klopeks are arrested and charges against Ray are dropped. Ray tells Ricky that he and his family are going away for a while and tells him to watch over the neighborhood.
Tom Hanks as Ray Peterson
Bruce Dern as Lt. Mark Rumsfield
Carrie Fisher as Carol Peterson
Rick Ducommun as Art Weingartner
Corey Feldman as Ricky Butler
Wendy Schaal as Bonnie Rumsfield
Henry Gibson as Dr. Werner Klopek
Brother Theodore as Uncle Reuben Klopek
Courtney Gains as Hans Klopek
Gale Gordon as Walter Seznick
Dick Miller as Vic, Garbageman
Robert Picardo as Joe, Garbageman
Cory Danziger as Dave Peterson
Franklyn Ajaye as Detective #1
Rance Howard as Detective #2
Heather Haase as Ricky's Girlfriend
Nick Katt as Steve Kuntz
Bill Stevenson as Ricky's Friend
Gary Hays as Ricky's Friend
Carey Scott as Ricky's Friend
Kevin Gage as Cop
Dana Olsen as Cop
Brenda Benner as Walter's Daughter
Patrika Darbo as Suzette Weingartner