"Genius" accidentally invents "goo" which causes living things to rapidly grow to an enormous size. Seeing an opportunity to get rich, some delinquent teenagers steal the "goo" and, as a result of a sophomoric dare, consume it themselves and become thirty feet tall. They then take over control of the town by kidnapping the sheriff's daughter and dancing suggestively.
Village of the Giants takes place in fictional Hainesville, California. After crashing their car into a roadblock during a rainstorm, a group of partying, big-city teenagers (Fred, Pete, Rick, Harry, and their girlfriends Merrie, Elsa, Georgette and Jean) first indulge in a vigorous, playful mud-wrestling fight, then hike their way into town. Fred remembers meeting a girl from Hainesville named Nancy, and they decide to look her up.
Nancy, meanwhile, is with her boyfriend Mike, while her younger brother "Genius" plays with his chemistry set in the basement. Genius accidentally creates a substance he names "Goo", that, when consumed, causes animals, including a cat and a pair of ducks, to grow to gigantic size.
The out-of-town teens break into the local theater and clean up from the rain, then go to a nearby club where The Beau Brummels are performing. Shortly, the giant ducks turn up, followed by Mike and Nancy. Everyone is astounded by the size of the ducks, wondering how they got so big. Mike explains that it's a secret, but following a suggestion made by their friends Horsey and Red, they host a picnic in the town square the next day, roasting the ducks and feeding everybody. Freddy Cannon is featured singing a song in this scene.
Fred and his friends also see potential in whatever made the ducks grow, but their minds are purely on profit. They scheme to learn the secret, and are ultimately successful, escaping with a sample. Back at the theater, the gang argues over what to do with the Goo, now that they have it. Feeling peer pressure, Fred slices up the Goo, giving everyone a piece each, which they consume a moment later. As the Goo takes effect, they each grow to over thirty feet (9 m) tall, ripping right out of their clothes. At first everyone is shocked and regretful, but realizing their newfound power at their new size, the gang decide to take over the town.
Overnight, the giants decide to isolate Hainesville from the rest of the world. They rip out the telephone lines, overturn broadcasting antennas, and block the remaining roads out of town. When the sheriff and Mike arrive to deal with them, they discover that the giants have no plans to leave – and are literally holding the sheriff's daughter, as "insurance" that they won't have any trouble. While the town's adults seem paralyzed, the teens decide to fight back. An attempt to capture Fred results in Nancy being taken hostage.
Meanwhile, Genius continues to work, trying to produce more Goo. Mike asks Genius to forget the Goo for a while, and make them a supply of ether – having noticed the giants only leave one guard on the hostages, Mike and Horsey plot to subdue that guard, recover the guns, and free Nancy and the sheriff's daughter.
Having led the giants outside the theater, Mike plays David to Fred's Goliath, to distract them while Horsey and the others effect the rescue. Genius' newest attempt at Goo results in an antidote. He rides over to the square on a bicycle with a pail full of the fuming antidote. As the giants breathe in the fumes, they all return to normal. Mike cold-cocks the surprised Fred, and promptly runs him and his friends, looking silly in their now-oversized clothes, out of town.
However, as Fred and the others reach their car, they meet a travelling band of little people who have (the torn-out telephone lines, overturned broadcasting antennas, and blocked roads notwithstanding) heard about the "goo" and its effects, and are heading into the town to investigate the substance.
