Following the events of the previous film, Rick Myers has been arrested under the suspicion of having caused the murders of Dr. Piper and Baker, but Dr. Jennings, the new director of the Artificial Intelligence research project and Rick's temporary superior, gets him out on bail. Blade has been confiscated, but he escapes from the police department's evidence room and jumps into Susie's purse as she comes to fetch Rick. Lauren lies comatose in the hospital following the events in the hotel. Meanwhile, in the underworld, Sutekh decides to take matters into his own hands and infuses his life essence into his own Totem figure.

While Jennings professes scepticism toward Rick's story, he becomes actually quite interested in acquiring Toulon's secret, especially since the project's unofficial sponsors are luring with a sizeable contribution, should he succeed in presenting a prototype soon. Jennings returns to the Bodega Bay Inn with three hired thugs - Tom Hendy, Jason, and Scott - to collect the puppets and the formula, but in the meantime Rick is roused by a nightmare and finds Blade by his side. Sensing that something is about to happen, Rick and Blade depart for the hotel. Susie, while paying a visit to Lauren, witnesses her friend receiving a vision of Sutekh and his Totem. Unable to contact Rick, she proceeds to the hotel as well.

While searching the building, Jason and Hendy are ambushed and killed by Sutekh, and Scott encounters and is knocked out by Pinhead and Jester. Jennings also encounters Sutekh but is saved by Torch and Six-Shooter; and the puppets start fighting back against Sutekh. Rick goes back to his room and runs into Suzie, but they both get locked in by Sutekh's powers. Through his computer, Rick gets in contact with Lauren, who tells him to activate The Decapitron. Jennings enters the room and tries to convince Rick to collect the puppets and leave the hotel. In the meantime, Scott recovers, but is also found and slain by Sutekh.

Jester enters the room and leads Rick to where the Decapitron is hidden. Rick, Suzie and Jennings proceed to revive Decapitron, and Toulon advises them to leave the hotel while the puppets will engage Sutekh. Jennings, however, insists on taking one of the puppets with him, despite Rick and Suzie's warnings. Rick, Suzie, and Jennings take the elevator down, but then Jennings attacks and knocks out Rick, while Suzie is pushed out of the cabin. But when Jennings exits the elevator, he is stopped by Decapitron and the other puppets, who force him back to the elevator shaft. With the cabin already gone and the door secretly opened by Pinhead, Jennings falls to his death.

Sutekh corners Rick and Suzie, but Decapitron shows up, allowing them to escape. The puppets engage Sutekh, who fights back; but having stayed too long in the mortal world, the demon's essence has become vulnerable, and his power wanes. In desperation, Sutekh attempts to escape back into the underworld by opening a portal, but Decapitron fires electron bolts at it, overloading the conduit and causing it to explode, destroying Sutekh.

Rick takes the puppets back home to repair and care for them. Toulon speaks with Rick one final time, again entrusting his puppets and their secret to him while they will continue to act as his protectors.

• Guy Rolfe as André Toulon
• Gordon Currie as Rick Myers
• Chandra West as Susie
• Ian Ogilvy as Jennings
• Teresa Hill as Lauren
• Nicholas Guest as Tom Hendy
• Willard Pugh as Jason
• Diane McBain as Attorney
• Duane Whitaker as Scott
• Kaz Garas as Man #2
• Clu Gulager as Man #1
• Ron O'Neal as Detective
• Jason Adams (archive footage) as Cameron Phillips
• Jake McKinnon (uncredited) as Sutekh

Featured puppets edit

• Blade
• Pinhead
• Jester
• Tunneler
• Torch
• Six Shooter
• Decapitron
• Dark Totem

• Puppet Master 5: The Final Chapter at IMDb  
• Puppet Master 5: The Final Chapter at AllMovie