Two American backpackers from New York City, David Kessler and Jack Goodman, are trekking across the moors in Yorkshire. As night falls, they stop at a local pub called the Slaughtered Lamb. Jack notices a five-pointed star on the wall, but when he asks about it, the pub-goers stop talking and become hostile. The pair decide to leave, although the pub landlady insists the others should stop them. Instead, the local pub-goers only warn them to keep to the road, stay clear of the moors and beware of the full moon.
David and Jack end up wandering off the road onto the moors, where they hear mysterious howls in the distance, which seem to be getting closer. Meanwhile, the crowd in the pub show conflict over letting the boys go, but refuse to go after them. The boys attempt to return to the Slaughtered Lamb but realise that they’re now lost but not alone. The boys are suddenly attacked by a vicious creature, whereupon Jack is mauled to death and David is severely injured by the beast. The beast is finally taken down when it is shot and killed by some of the pub-goers, who have finally come out to search for the boys, saving David’s life. Instead of the dead animal, David sees the corpse of a naked man lying next to him before he passes out.
David is then taken to a hospital in London where he wakes up three weeks later and does not remember what happened. He is interviewed by police Inspector Villiers who tells him that he and Jack were attacked by an escaped lunatic, but David insists they were attacked by some sort of rabid dog or wolf. Jack appears to David as a ghost, and explains the beast that attacked them was a werewolf, revealing that David is now one. Jack urges David to kill himself before the next full moon, not only because Jack is cursed to be a ghost for as long as the bloodline of the werewolf that attacked them survives, but also to prevent David from inflicting the same fate on anyone else.
David does not believe him, thinking that Jack is a hallucination. Meanwhile, Dr. Hirsch takes a road trip to the Slaughtered Lamb to see if what David has told him is true. When asked about the incident, the pub-goers deny any knowledge of David, Jack, or the attack. However, one distraught pub-goer speaks to Dr. Hirsch outside the pub and says David should not have been taken away, and that everyone else will be in danger when he transforms. The man is then cut off by a fellow pub-goer.
Upon his release from intensive care, David moves in with Alex Price, a young nurse who grew infatuated with him in the hospital. He stays in Alex’s London apartment, where they later have sex for the first time. Jack, in a more advanced stage of decay, appears to David to warn him that he will become a werewolf the next night. Jack again advises David to take his own life to avoid killing innocent people, but David still refuses to believe him and urges him to go away. When the full moon rises, David suddenly feels extremely hot, rips off his clothes and painfully transforms from his human form into a ferocious werewolf. David, now in his werewolf form, begins to prowl around the streets and the London Underground, killing and slaughtering six people in the process. He wakes up the next morning naked on the floor of a wolf enclosure at the London Zoo, unharmed by the resident wolves and with no recollection of what happened. To avoid being seen, he steals balloons from a boy along with a coat and rides back in a bus.
David realises that Jack’s ghost was right about everything and that he is responsible for the murders the night before. After failing to get himself arrested in Trafalgar Square and sent to prison, a scared David runs away from Alex. He goes to Piccadilly Circus, calling his family from a phone booth to say he loves them, then loses courage when he attempts and fails to slit his own wrists with a pocket knife. David then suddenly sees Jack, in a yet more advanced stage of decay, outside of an adult movie theater. Inside, Jack is accompanied by David’s victims from the previous night, most of whom are furious with David (although the young couple he murdered appear unfazed). While his ghost victims suggest various and comical ways for David to commit suicide with the least amount of pain, David transforms again into his werewolf form inside the movie theatre and goes on another killing rampage.
After crashing out of the cinema and decapitating Inspector Villiers, the werewolf David wreaks havoc in the streets, causing a massive car crash, resulting in many deaths. Finally, he is ultimately trapped and surrounded in an alleyway by the police when Alex suddenly runs down the alley in an attempt to calm David by telling him that she loves him. Although David recognizes her and is apparently calm for a brief moment, he is immediately shot when he lunges forward at the police before he turns back into his human form in front of Alex and dies. She begins to tearfully mourn for the loss of David while staring at him lying dead and naked on the ground.