Jon Lansdale (Michael Caine) is a comic book illustrator, whose relationship with his beautiful wife Anne (Andrea Marcovicci) and daughter Lizzie (Mara Hobel) is on the rocks. While driving, Anne and Lansdale end up behind a slow-moving truck and an impatient driver behind them. In the heat of an argument, Anne accidentally pulls back too fast while Lansdale is waving down the truck driver, causing his right hand to be completely severed. Anne attempts to find the severed hand but it is too late.
Lansdale then starts a painful adjustment to not having his drawing hand, while Anne deals with the guilt of having caused the accident and tries to get closer to her husband. Lansdale attempts unsuccessfully to recover the hand himself, though he does find his signet ring that Anne gave him. The couple move to New York and Lansdale is approached by his friend and agent Karen Wagner (Rosemary Murphy) to co-produce his comic with another artist, David Maddow (Charles Fleischer). Lansdale however, begins to show signs of a mental breakdown, and when he shows the test boards to Karen, they are all marked up. The deal is off and Karen fires Lansdale, who cannot recall marking up the boards while questioning his daughter about the incident. In a fit of frustration, Lansdale loses his signet ring. Anne is unable to cope with Lansdale’s increasingly erratic behavior and general instability. Lansdale becomes jealous of Anne’s yoga instructor and begins his slow descent into total darkness when an encounter with a homeless man (Oliver Stone) leaves the man dead at the “hand” of his former appendage. It’s not entirely clear whether or not this was a real event or something in his mind. Lansdale begins having hallucinations about various inanimate objects coming to life as a hand, like a shower faucet.
After his final meeting with Wagner, Lansdale comes forth with his intention to take an offer to teach at a small community college in California. At the suggestion of his friend Brian (Bruce McGill), Lansdale rents out a cabin in the woods for the time being. While the majority of his students fail to show an interest in comic books, this is not the case with Stella (Annie McEnroe), who also takes a personal interest in Lansdale. Annie insists on staying with Lansdale during the Christmas season, and he begins to have violent hallucinations about the hand strangling her. That night, the missing ring reappears on Lansdale’s pillow.
Lansdale and Stella begin a romantic relationship despite the latter showing an interest in Brian. Not long after, Lansdale meets Brian at a bar, but is confused as he should be on a two-week vacation with Stella. He soon learns that Brian hasn’t seen her since she last went to Lansdale’s cabin. Lansdale picks up Anne at the airport, but soon realizes she has no real intention of staying as she previously claimed. He hallucinates the hand strangling her, causing the car to crash in a fiery explosion. While his wife and daughter are at the cabin, Lansdale confesses to Brian that he slept with Stella. Soon after, Brian is killed in his car by the hand.
That night, Lansdale awakens to see the hand trying to kill Anne. Lizzie overhears the commotion and calls the police, and Lansdale chases the hand outside into the nearby barn. The hand tries to attack him, but Lansdale stabs it. The hand crawls to a nearby spare tire and explodes into a puff of smoke, before wrapping itself around Lansdale’s throat and causing him to lose consciousness.
Lansdale awakens to find his own hand (the one attached) around his throat while the police skulk around. The sheriff, with Lizzy, and his deputies attempt to ask Lansdale what happened. Discovering that Anne is still alive, Lansdale attempts to explain what happened when the officers notice a pungent smell permeating the area in the carport around the car, specifically from the trunk. Lansdale tries to prove that nothing is wrong by opening the trunk, only to be horrified by the sight of Stella and Brian’s dead bodies stuffed inside.
At a local insane asylum, a psychologist (Viveca Lindfors) is trying to communicate with Lansdale. She wants him to remember and admit that it was him, not his severed hand, who killed all the victims. He says that the hand wants to kill her because it hates her. Suddenly, the hand (which apparently existed all along) appears from behind the psychiatrist and strangles her. Lansdale, completely taken over by the essence of the hand, looks at her dead body and starts to laugh. He loosens the restraint on his other hand and gets up, presumably to escape from the asylum.