Inventor Rand Peltzer tries to sell his newest invention, a bathroom gadget, in Chinatown. He follows a young Chinese boy to his grandfather’s shop, and, there, finds a mogwai, a small furry creature that likes to sing. Rand asks to buy the mogwai as a Christmas present for his son Billy; however, the grandfather refuses, saying the mogwai requires a very responsible owner. Worried that his family needs money, the Chinese boy secretly directs Rand outside where he accepts two hundred dollars in exchange for the creature. The boy informs Rand of three rules: keep the mogwai out of bright light, especially sunlight which can kill it; never let the mogwai near water; and, most importantly, never feed the mogwai after midnight. In the small town of Kingston Falls, Billy Peltzer cannot start his car before work. The next-door neighbor, Mr. Futterman, notices Billy having trouble with his car, a Volkswagen Beetle, and complains about the unreliability of foreign automobiles. Billy walks to his job at the bank with his dog, Barney, who sits beneath Billy’s desk. Kate, a coworker, asks Billy to sign a petition to have Dorry’s Pub declared a landmark because Mrs. Deagle, a wealthy landlord, is trying to take the lease away. Shortly after, Mrs. Deagle arrives at the bank with part of a snowman lawn ornament and accuses Billy’s dog, Barney, of breaking it. Deagle refuses to accept payment, and threatens to take Barney to the kennel instead. Barney undoes his own leash and jumps over the counter at her, driving her out of the bank. After work, Billy’s smug coworker, Gerald, tells Billy that their boss almost fired him over the incident. Kate, who is working at the pub for free to help out Dorry, delivers drinks to Billy’s table and rejects Gerald when he asks her on a date. Billy returns home and offers to help his mother, Lynn Peltzer, cook dinner, but when he attempts to use one of his father’s inventions, it fails. Rand arrives home with the mogwai wrapped in a box and insists Billy must open the gift before Christmas. At Rand’s request, Lynn dims the lights, and Billy opens the box to find the mogwai, which Rand has named “Gizmo.” Lynn tries to snap a picture of Billy with his new pet, but the flash startles Gizmo, and Rand relays the three rules about mogwai that he learned from the young Chinese boy. The next morning, Billy shows Gizmo to his friend Pete, who accidently spills water on the mogwai, causing it to scream and writhe. Soon after, five small fur balls pop out of Gizmo’s back, and each quickly grows and becomes another mogwai. Pete tries to pet one of them, named “Stripe” because he has a white mohawk, but the creature bites him. Billy informs Rand that the mogwai multiplies with water, and Rand gets the idea that he could sell them to children as “The Peltzer Pet.” That night, Billy finds Barney dangling from a strand of Christmas lights outside and assumes that Mrs. Deagle is responsible, although Stripe is the real culprit. Later, Billy takes a mogwai to Roy Hanson, a high school science teacher, and shows him how it multiplies by dropping water onto the creature. A fur ball pops out of the mogwai’s back and grows into another mogwai, and Hanson asks to keep one of them for observation. Later, Kate escorts Mr. Futterman, who is drunk, outside Dorry’s Pub. Billy arrives and helps with Futterman, who complains that foreign companies seeking to sabotage the United States put gremlins into their machines before exporting them. That night, Billy wakes to the sound of hungry mogwai and checks his alarm clock to make sure it is before midnight. He feeds Stripe’s gang, but Gizmo refuses to eat. Meanwhile, at the school, Hansons’s mogwai steals food and eats after midnight as well. The next morning, Billy wakes up to find that all of the mogwai except Gizmo have transitioned into a pupal stage and are now surrounded by slimy cocoons. Billy realizes he must have fed them after midnight when he finds that the cord to his alarm clock was cut. At school, Hanson watches his mogwai hatch from the cocoon and emerge as a slimy, sharp-toothed gremlin. Hanson calls Billy and urges him to come to the school, but when he arrives, Billy finds that the gremlin has killed the teacher. Frantic, Billy calls Lynn, warning her to get out of the house. Instead, she fights the gremlins and kills three of them before Billy returns and helps her kill the fourth. Only Stripe escapes, and Billy follows it to the YMCA where it jumps into the pool and starts to multiply. Billy runs to the police station and warns Sheriff Frank and Deputy Brent about the gremlins, but they do not believe him. Soon, throngs of gremlins wreak havoc on the town. At Dorry’s Pub, they drink, smoke, and trash the place while Kate serves them. When she notices they are afraid of bright light, Kate uses a Polaroid camera to immobilize the gremlins and escapes. Carrying Gizmo with him, Billy meets Kate outside and they run to the bank for shelter. After the gremlins disappear from the streets, Kate and Billy leave the bank and find all of the gremlins gathered in the town’s movie theater, watching Snow White and the Seven Dwarfs . Billy starts a gas leak in the building and lights a fire, escaping with Kate just before the theater explodes. Though the gremlins are killed, Kate and Billy realize that Stripe was at the nearby department store and is still alive. Inside the store, Billy pursues Stripe, and Stripe fights him off by throwing saw blades, then arrows, and eventually comes after Billy with a chainsaw. Moments before Stripe can saw through Billy’s baseball bat, Kate turns on the store lights, and Stripe is knocked across the room by the brightness. Stripe finds a bubbling fountain and jumps onto it, but just as he begins to multiply, Gizmo pulls the shade on a window, exposing Stripe to sunlight and melting him to death. That night, the grandfather from Chinatown arrives at the Peltzer’s house and retrieves Gizmo, telling the Peltzers that they weren’t prepared for such a responsibility. Gizmo says goodbye to Billy and the grandfather tells him that the mogwai will be waiting for him until the day he is ready.