Ray Peterson awakens one night to investigate a strange light coming from his new neighbor’s basement, but is pushed back by a strong wind. He notices someone watching him from an upstairs window and retreats into his house. The next morning, Ray observes as “Queenie,” a small poodle owned by Walter Selznick, excretes on Lieutenant Mark Rumsfield’s lawn, while Ricky Butler, a teenage neighbor, prepares to paint his house. Rumsfield and his wife Bonnie emerge from their home and run an American flag up their flagpole. Ricky yells for Lt. Rumsfield to be careful, but the older man steps in the pile of feces and screams vengeance on the dog. Over breakfast, Ray’s wife, Carol, bemoans the fact that Ray is staying home for his vacation instead of going to their lake house. Another neighbor, Art Weingartner, stops by and begins gossiping about the cul-de-sac’s new residents, the Klopecks, whose previous home supposedly burned down in a fire. Ray’s young son, Dave, claims that he saw the family of three digging in the backyard late at night. After breakfast, Art and Ray dare each other to visit the Klopeck’s house. Realizing all the neighbors are watching them, they climb the porch stairs and bang the doorknocker. A porch light falls, and a swarm of hornets chase them across the street. That night, Art tells Ricky a story about a man who murdered his family in their town. He was caught because a heat wave caused the bodies to decompose, creating a hideous smell. Ray confirms the story and wonders what their new neighbors are doing in their cellar. Later, Art and Rumsfield use an infrared scope to spy on the Klopecks. A loud hum emanates from the cellar as a shock of lightning strikes the rooftop, causing the other lights in the neighborhood dim out. A smell that Rumsfield describes as “a burning cat,” permeates the air. They hide as the Klopecks’ garage door opens and Hans Klopeck drives his car to the curb, removes a large plastic bag, and stuffs it into a trash can. It begins to rain, so the men decide to wait to dig through the garbage. As the storm intensifies, Ray watches from his bedroom as the three Klopecks—Hans, Werner, and Rubin—dig a hole in their backyard. When a trash truck appears the next morning, Art and Rumsfield snatch Klopecks’ waste from the compactor and strew it across the ground, but do not find anything unusual. Art theorizes that the Klopecks spotted them and buried the body to hide the evidence. They notice Queenie running loose and go to return the dog to Walter Selznick. When no one responds to their knock, Rumsfield breaks into the house and discovers the television has been left on and a chair overturned. They grow concerned when they discover Walter’s toupee. Art breaks a knick-knack, causing Ray to order everyone out of the house. He unconsciously puts Walter’s toupee in his pocket and leaves a note telling Walter he has Queenie. He slips it and the toupee into the mail slot, and notices someone in the Klopecks’ house watching him. The next day, Art tells Ray he slipped a note under the Klopecks’ door reading, “I know what you’ve done.” As Ray frets that the Klopecks will think he did it, his dog, Vince, arrives carrying a human femur. They realize Vince dug it up in the Klopecks’ yard. Just then, Art’s note is tossed into Ray’s yard, causing him to panic. He runs into the screen door just as Carol storms out, claiming she has had enough of the men’s childish behavior and demands they simply introduce themselves. Hans Klopeck answers the door, and reluctantly lets them inside to meet his Uncle Rubin. They sit in awkward silence while Hans makes coffee. Ray complains about the neighborhood drainage problems and suggests they check the Klopecks’ cellar for moisture. Before Ruben can answer, Dr. Werner Klopek emerges from the basement wearing a rubber apron, wiping what looks like blood off his hands, but explains it is only red paint. Werner plays the perfect host, explaining that his teaching at the local university requires him to move frequently, and that he is already planning to look for a new house the next day. Ray spills hot coffee on his lap and rushes off to find a bathroom. Instead, he opens the basement door and releases a Great Dane. The dog smashes through a screen door, spots Art, who has sneaked into the backyard, and chases him over the fence. Later, the neighbors regroup and Ray reports that the Klopecks seem “alright.” However, once the women leave, he pulls Walter’s toupee from his shorts. He states he left it at Walter’s house, but found it at the Klopecks’ in a pile of magazines addressed to Walter. The next morning, Carol takes Dave to visit her sister. When the Klopecks leave their house, Art scales a utility pole to cut the power lines, disabling any alarms. He clips a wire, and the electrical charge hurls him into an old tool shed, causing a blackout throughout the neighborhood. Hearing the disturbance, Ricky Butler sees Rumsfield climbing onto Ray’s roof to maintain a lookout and calls his friends to come over and watch the fun. After hours of digging up the backyard, Art suggests they search the house. Ray breaks a window and they descend to the basement, where they find a commercial blast furnace. When Ray turns it on, the noise startles Rumsfield, who falls off the roof and discharges his rifle, shooting out a car window. Convinced that bodies are buried under the cellar’s dirt floor, Ray begins to dig. That night, the Klopecks return to see the glow of the furnace coming from their cellar. They turn off their headlights and drive away. When Ray hits something metallic, Art radios Rumsfield claiming that they have found Walter and runs out of the house. Just then, Walter arrives home and the Klopecks return with the police. Rumsfield attempts to alert Ray, but his radio is covered with mud. Art races to the cellar as Ray declares he has hit a gas line. Art barely escapes the house before the furnace flames ignite the gas. He despairs that Ray is dead, but his friend limps out of the burning ruin with half his hair singed off. Later, Carol returns to find Ray bandaged and under arrest. A police captain explains that Werner Klopeck is a famous pathologist who was collecting mail for Walter while the old man was in the hospital. Ray realizes Werner must have picked up the toupee while collecting the mail, and concludes their paranoid suspicions were unwarranted. When Art mentions that someday police will find a body buried in the backyard, Ray loses his temper and tries to strangle him. He hurls a gurney into an ambulance, jumps inside, and demands to be taken to the hospital. Werner climbs in with him, and Ray apologizes. To his surprise, however, Werner accuses Ray of finding skulls hidden in the furnace, and explains that he murdered the previous tenants before moving in. Ray looks up to see that Hans behind the wheel. Before he can scream, Werner pulls out a syringe and Hans drives away. Ray pushes Werner into Hans, who loses control of the vehicle and smashes into a tree. The back doors spring open and the crowd sees Ray and Werner fighting as the gurney rolls down the road and into the Klopecks’ car, causing the trunk to pop open. Declaring a “citizen’s arrest,” Ray knocks the syringe from Werner’s hand. Ricky Butler lifts a skull out of the trunk, and police arrest the Klopecks. Ray puts his arm around Carol and tells her he wants to go to the lake, instructing Ricky to keep an eye on the neighborhood.