Krank (Daniel Emilfork), a highly intelligent but malicious being created by a vanished scientist, is unable to dream, which causes him to age prematurely. At his lair on an abandoned oil rig (which he shares with the scientist’s other creations: six childish clones, a dwarf named Martha, and a brain in a vat named Irvin), he uses a dream-extracting machine to steal dreams from children. The children are kidnapped for him from a nearby port city by a cyborg cult called the Cyclops, who in exchange he supplies with mechanical eyes and ears. Among the kidnapped is Denree (Joseph Lucien), the adopted little brother of carnival strongman One (Ron Perlman).
After the carnival manager is stabbed by a mugger, One is hired by a criminal gang of orphans (run by a pair of Siamese twins called “the Octopus”) to help them steal a safe. The theft is successful, but the safe is lost in the harbor when One is distracted by seeing Denree’s kidnappers. He, together with one of the orphans, a little girl called Miette (Judith Vittet), follows the Cyclops and infiltrates their headquarters, but they are captured and sentenced to execution. Meanwhile, the Octopus orders circus performer Marcello (Jean-Claude Dreyfus) to return One to them. He uses his trained fleas, which inject a poison capsule that causes mindless aggression, to turn the Cyclops guards against each other. While Marcello is rescuing One, Miette falls into the harbor and sinks, seemingly drowned, but an amnesiac diver living beneath the harbor rescues her.
Miette leaves the diver’s lair to find One and Marcello both drowning their sorrows in a bar. Upon seeing Miette alive the remorseful Marcello lets One leave with her. However the Octopus confronts them on the pier, and uses Marcello’s stolen fleas to turn One against Miette. A spectacular chain of events triggered by one of Miette’s tears leads to a ship crashing into the pier before One can throttle her. Marcello arrives and sets the fleas on the Octopus, allowing One and Miette to escape to continue searching for Denree.
Back at Krank’s oil rig, Irvin tricks one of the clones into releasing a plea for help in the form of a bottled dream telling the story of what is going on on the oil rig. It reaches One, Miette, and the diver, and the latter remembers that he was the scientist who made them, and that the oil rig was his laboratory before Krank and Martha attacked him and pushed him off it to take it for themselves, leaving him for dead in the water. They all converge on the rig; the diver to destroy it and the duo to rescue Denree.
Miette is almost killed by Martha, but the diver harpoons her. She then finds Denree asleep in Krank’s dream-extracting machine, and Irvin tells her that to release him she must use the machine to enter the dream herself. In the dream world, she meets Krank and makes a deal with him to replace the boy as the source of the dream; Krank fears a trap but plays along, believing himself to be in control. Miette then uses her imagination to control the dream and turn it into an infinite loop, destroying Krank’s mind. One and Miette rescue all the children, while the now-deranged diver loads the rig with dynamite and straps himself to one of its legs. The diver regains his senses as everyone is rowing away and pleads with his remaining creations to come back to rescue him, but a seabird lands on the handle of the blasting machine, blowing up him and the rig.