Valentine "Val" McKee and Earl Basset work as handymen in Perfection, Nevada, an isolated ex-mining settlement in the high desert east of the Sierra Nevada Mountains. Perfection is home to 14 residents, among them general store owner Walter Chang, and survivalist couple Burt and Heather Gummer. A new arrival is Rhonda LeBeck, a graduate student conducting seismology tests. Val and Earl tire of their hand-to-mouth existence and leave for Bixby, the nearest town. They discover another resident, Edgar, dead at the top of an electrical tower, though still holding on to the beams with a .30-30 Winchester rifle. Jim Wallace, the town doctor, determines that Edgar died of dehydration, apparently afraid to climb down. Elsewhere, shepherd Old Fred and his flock are attacked by a force that drags him underground. Val and Earl arrive, only to find the sheep cut to pieces and Fred's severed head buried in the sand. Val and Earl return to Perfection, thinking a murderer is on the loose. They warn two road-construction workers they encounter, but to no avail. After Val and Earl leave, Carmine, the worker using a jackhammer to break up asphalt, stabs something under the ground, causing orange blood to erupt on the surface, before getting dragged underground, while the other worker is killed by a rock slide.
Val and Earl discover the town's phones dead and head for the police in Bixby, but are thwarted by the rock slide, which had downed the phone wires. They return to Walter's store, where they find something wrapped around their truck's back axle: the severed body of a large, snake-like creature. That night, the creatures attack the doctor and his wife, killing them both and pulling their car underground.
The next morning, Val and Earl leave to get help, this time on horseback. They discover the doctor's buried car. As they press on, the attackers suddenly erupt out of the ground, revealing the creatures they have seen thus far are actually "tongues" employed by an enormous burrowing worm-creature that Walter later names "Graboids". Thrown from their horses, the two men run for their lives. When they jump into a concrete aqueduct, their pursuer rams through its wall, killing itself. Rhonda happens upon the scene and determines from her readings that three more creatures are in the area. They realize the creatures have extremely acute hearing, and find them due to their vibrations, but cannot tunnel through rock. One of the creatures traps the trio overnight at a cluster of boulders, where they speculate the creatures' origins. Rhonda has the idea of pole vaulting from boulder to boulder to reach her truck, and they return to town.
They are met with disbelief from the townspeople until a graboid appears, disabling Val and Earl's truck. Everyone retreats into their homes or the store, hoping the downed phone lines and the rock slide will eventually bring help, but the graboids make that impossible. When a graboid bursts through the store's floor and drags Walter away, the residents are forced onto the roofs.
The Gummers return to their home after unsuccessfully hunting the creatures - unaware of their true size - and contact the others by CB radio, but the noise of the couple's cartridge case polisher leads a graboid to smash into their basement. The Gummers open fire with various firearms and manage to kill it, but another graboid disables their vehicle. After retreating to their rooftop, Burt and Heather experiment with firing into the ground, but discover they are too deep underground for firearms to be effective. In town, the graboids attack the foundations of the buildings, knocking over Nestor's trailer and dragging him down underground. Realizing the town is being dug out from under them, Val and Earl plan to escape on a dump trailer with flat tires pulled by a bulldozer, which is too heavy for the graboids to move. Val reaches the vehicle while the others distract the graboids. Everyone is collected, including the Gummers, who bring with them an assortment of weapons and improvised explosives, and they set out for the safety of a nearby mountain range.
The graboids dig a pit-trap in the bulldozer's path, wrecking it. The townsfolk use Burt's home-made explosives to drive the creatures away long enough to reach the safety of a boulder, where Earl has another idea: tricking the graboids into swallowing Burt's bombs. This works once, but on the second try, the last graboid spits the explosive onto Burt's pile of bombs, sending everyone scattering. Val, Earl, and Rhonda are stranded yards from the boulder, with the graboid blocking their path to safety. Val has one more bomb and one last idea: he lets the graboid chase him to the edge of a cliff and "stampedes" it with the bomb, then jumps out of its way, sending it through the cliff-face to its death. The group returns to town, where they call in the authorities to begin an investigation of the graboids, and Earl pushes Val into approaching the clearly interested Rhonda romantically.
Kevin Bacon as Val
Fred Ward as Earl
Finn Carter as Rhonda
Michael Gross as Burt Gummer
Reba McEntire as Heather Gummer
Robert Jayne as Melvin Plug
Charlotte Stewart as Nancy Sterngood
Tony Genaro as Miguel
Ariana Richards as Mindy Sterngood
Richard Marcus as Nestor
Victor Wong as Walter Chang
Sunshine Parker as Edgar
Michael Dan Wagner as Old Fred