The film opens with a woman, Flora Bosch, walking her dog down an empty, darkened city street. As she passes by a manhole, a creature attacks Mrs. Bosch and drags her and the dog into the sewers.
George Cooper, a once-prominent fashion photographer, has since forgone fame and fortune and is living with his girlfriend Lauren. His current project is photographing New York City's homeless population, specifically those known as "undergrounders", or people who reside within the bowels of the city.
NYPD Captain Bosch has a personal interest in the recent flood of missing persons being reported to his precinct, as Flora, his wife, remains missing. Bosch interviews A.J. "The Reverend" Shepherd, who runs the local homeless shelter. A.J. believes that the recent events are part of a massive government cover-up and has the evidence to prove it. Bosch's superiors know more than they are letting on and seem to be taking their cues from Wilson, who works for the Nuclear Regulatory Commission (NRC).
It turns out that monsters are lurking beneath the streets; beings that were once human, but have been mutated by radioactive, chemical toxic waste into hideous, flesh-eating creatures that prey on the homeless who live in the underground. Given the recent drop in the underground transient population, the creatures have resorted to coming to the surface through sewer manholes to feed. Through a series of events, both George and A.J. find themselves trapped in the sewers, a reporter gets involved and eaten, and Lauren has a problem with both a clogged shower drain and a mutant that comes up through the sewer access point that she opened in the basement of her apartment building.
A.J. and George meet up and discover that the Nuclear Regulatory Commission is directly involved in the slaughter that has been going on. Although the political bureaucracy has forbidden the NRC to transport the toxic wastes through New York because of the large-scale danger to the public, it has secretly been hiding the waste by-products, marked as "Contamination Hazard Urban Disposal", beneath Manhattan in the abandoned subway tunnels. The underground homeless population has been coming into contact with these by-products, turning them into the mutated creatures. To protect this secret, Wilson plans to seal the sewers, open up some gas lines and asphyxiate the C.H.U.D.s and any witnesses of their existence, despite the inherent danger to the city. In the meantime, Lauren is attacked by the mutants in her apartment and narrowly escapes them.
Later that evening at a diner, two police officers and the waitress are killed and carried off by the mutants, finally drawing the public's attention to the disappearances. George and A.J. recover a camera set left behind by an NRC crew slain by the mutants during a previous clean-up attempt and use it to report their findings to Bosch. Confronted by Bosch, Wilson runs off, and later shoots Bosch while the latter helps A.J. and George escape from a manhole. Wilson then tries to run George and A.J. over with a truck, but A.J. fatally shoots Wilson with Bosch's gun, and the truck explodes as it drives into the manhole.
