The film opens at Springwood Diner, where troubled teen Dean Russell is struggling to stay awake and out of the clutches of a mysterious man with "knives for fingers". After nodding off once and having his hand slashed by the mysterious man, who has burned skin, wears a red and green sweater, and sports a dirty old fedora hat. Dean is terrified of sleeping, but is slowly growing more and more desperate. By the time his girlfriend Kris arrives at the diner, Dead falls asleep again and has his throat cut by the mysterious dream assailant. To the rest of the diner's patrons, it looks like a suicide. Given Dean's troubled past, the people find the story easy to believe, if not tragic.
Jesse gets viscously murdered
At Dean's funeral, a photo collage is set up honoring Dean's memory, with pictures of him at various stages of his life. Kris looks at the photos and notices one of him and her together, while they were each about five years old. Kris doesn't see how it could be possible, considering that she didn't meet Dean until high school. Kris' mother, uneasily grabs her daughter away to the limousine. Later that night, Kris' former boyfriend Jesse sneaks in through Kris' bedroom window to keep her company for the night. As Kris sleeps, she dreams of the same man that killed Dean, and she is viscously murdered. Jesse has no choice but to stand by and watch as she is brutally thrown around the room like a ragdoll before being slashed to death by what appear to be four long knives.
Jesse sitting in his jail cell
Hysterical and with blood on his hands, Jesse runs to the home of Nancy Holbrook, and tells her what happened. Nancy reveals that she has also been having similar dreams, and discovers that the burnt man's name is Freddy. Shortly after arriving at Nancy's house, Jesse is taken into police custody and charged with Kris' murder. While sitting in his jail cell, Jesse struggles to stay awake, but ultimately falls asleep. He dreams that he has been bailed out, but when the jailhouse turns into a boiler room, he is confronted by Freddy. Jesse pleads for his life, and asks what Freddy wants from him and the other kids, with Freddy simply responding "Can you turn back time? Can you bring the dead back to life? Didn't fuckin' think so!". Freddy disappears before his glove is suddenly thrust through Jesse's back, coming out of his stomach and killing him.
Quentin witnessing Freddy's origin story
Hearing about Jesse's death, Nancy starts to do research on why her and her friends are being targeted by Freddy. It is revealed that they all attended the same pre-school, and that there was a gardner that worked there by the name of Freddy Krueger. Freddy loved the kids, and considered Nancy to be his favorite. At one point, Nancy came home from school and told her mother that Freddy had been molesting her and a few of the other kids, in what he referred to as his "Magic Cave". Nancy's mother claims that Freddy left town before he could be arrested, but Nancy is cynical about the story. Her friend Quentin tries to force himself to believe that the dreams are just repressed memories, but when he falls asleep during swim team practice, he witnesses Freddy's actual origin story.
Freddy being burned alive
Freddy is seen before being burned, and is a seemingly innocent man. He is chased into an abandoned boiler room by the angry parents of Springwood, and he locks himself inside. Angry and out for blood, the parents throw molotav cocktails into the boiler room, burning Freddy alive. Upon awakening, Quentin confronts his father of his crime, claiming that he and the other parents murdered an innocent man. Meanwhile, Nancy continues to research the fate of the other kids who were in her preschool class, only to find that they've all committed suicide or have been murdered in their dreams.
Nancy desperately tries to stay awake
Desperate for answers and for sleep, the two decide to go to the preschool to find out the truth about Freddy. On the way they stop at a pharmacy, and as Quentin desperately tries to get his ADD prescription refilled, Nancy is attacked by Freddy during a "micro-nap". Micro-naps are instances that occur in Insomniacs around the 70th hour of sleep deprivation. The brain shuts down temporarily without the body knowing it, leading the patient to dream while they are awake. Nancy is woken up by Quentin just in time, and is able to pull a piece of Freddy's sweater out of the dream world and into the real world. Nancy holds this as the key to Freddy's defeat and decides the only way to defeat him is at the preschool where it all began.
At the preschool, Quentin and Nancy find Freddy's "Magic Cave" and the instruments of terror inside of it. They realize that Freddy was in fact a child molester, and not the innocent man he appeared to be. Nancy sets an alarm and tells Quentin that the only way to kill Freddy is to bring him into the real world and kill him. Quentin promises to wake up Nancy when the time is right, but falls asleep himself. He is badly wounded by Freddy but wakes up just in time to save Nancy with an adrenaline shot. Quentin uses the blade to an old paper cutter to sever Freddy's gloved hand, but Freddy manages to strike him down again. Nancy recovers the blade and exclaims "Welcome to my world, Bitch!" before cutting Freddy's head off and killing him, once and for all. Nancy returns home with her mother, and while they prepare to go to bed, Freddy appears in a mirror and kills her, setting up for a possible sequel.
Differences From the Original:
In the original film, Freddy was simply called a child killer. The re-make puts more emphasis on the sexual nature of Freddy's crimes, particularly during Nancy's final dream where Freddy attempts to rape her.
Freddy's appearance and demeanor is much darker in this film, with his skin being much more similar to that of an actual burn victim, and his notorious one-liners from the '80's movies being toned down quite a bit. Aside from a sadistic joke here and there, Freddy is much less funny than in previous instalments.
Nancy's last name in the original was Thompson, not Holbrook.
The final battle and Freddy's death are lifted almost word for word from previous instalment Freddy Vs. Jason.
In the original, Rod, who is Jesse in the re-make, dies in a mock suicide by Freddy, who hangs him from his bed sheets. Jesse's death is much more graphic and tense, probably in an effort to perpetuate the dark tone of the re-make.
In the original, Freddy is burned to death by Nancy in the real world.
The 1984 equivalent to Quentin's character, Glen, played by then-newbie Johnny Depp, was killed in an infamous scene where he is sucked into his own bed by Freddy.