The film is set in a slum in the heart of an industrial center. It is rife with urban decay, rundown factories, and a soundtrack composed almost exclusively of the noises of machinery. Henry Spencer (Jack Nance) is a printer who is "on vacation." At the start of the film, Henry, who has not heard from his girlfriend, Mary X (Charlotte Stewart) for a while, mistakenly believes that she has ended their relationship. He is invited to have dinner with Mary and her parents at their house. Briefly we see Mary's catatonic grandmother in the kitchen. Mrs. X mixes the salad with the grandmother's hands. At the dinner table the conversation is obviously strained and awkward. They are having artificial chicken for dinner, which promptly starts to twitch and emit a large amount of blood through its rear end when Henry attempts to carve it up. They stare at it in shock, then the two women burst into tears and leave the room. After the failed meal Henry learns that Mary has just had a baby after an abnormally short pregnancy. Henry is then obliged to marry her.
Mary and the baby move into Henry's one-room apartment. The baby is hideously deformed and has a reptilian appearance: a large snout-nose with slit nostrils, a pencil-thin neck, eyes on the sides of its head, no ears, and a limbless body covered in bandages. It continually whines throughout the night.
A sleep-deprived Mary abandons Henry and the baby (who also turns out to be sick). After Mary leaves, Henry must care for the baby by himself, and he becomes involved in a series of strange events. These include bizarre encounters with the Lady in the Radiator (Laurel Near), a woman with grotesquely distended cheeks who lives in his radiator (she sings the iconic song "In Heaven"); visions of the ominous Man in the Planet (Jack Fisk); and a sexual liaison with his neighbor, the Beautiful Girl Across the Hall (Judith Anna Roberts).
The film's title comes from a dream sequence occurring during the last half hour of the film. In it, Henry’s head detaches from his body, sinks into a growing pool of blood on a tile floor, falls from the sky, and, finally, lands on an empty street and cracks open. A young boy (Thomas Coulson) finds Henry's broken head and takes it to a pencil factory, where Paul (Darwin Joston), the desk clerk, summons his ill-tempered boss (Neil Moran) to the front desk by repeatedly pushing a buzzer. The boss, angered by the summons, yells at Paul, but regains his composure when he sees what the little boy has brought. The boss and the boy carry the head to a back room where the Pencil Machine Operator (Hal Landon, Jr.) takes a core sample of Henry's brain, assays it, and determines that it is a serviceable material for pencil erasers. The boy is then paid for bringing in Henry's head. The Pencil Machine Operator then sweeps the eraser shavings off of the desk and sends them billowing into the air.
After waking from this dream, Henry looks out his window and sees two men fighting in the street. He then seeks out the Beautiful Girl Across the Hall, but discovers that she is not home. The baby begins to cackle mockingly, and, shortly thereafter, Henry opens his door and sees the Beautiful Girl Across the Hall bringing another man back to her apartment. She looks at Henry, momentarily sees Henry's head transform into that of the baby, and appears frightened by her vision. Henry goes back into his apartment, takes a pair of scissors, and cuts open the baby's bandages, which turn out to be part of its flesh (or simply what is holding all of its organs together). By cutting the bandages, Henry splits open the baby's body and exposes its vital organs. As the baby screams in pain, Henry stabs its heart with the scissors. This causes the apartment’s electricity to overload, and as the lights flicker on and off, an apparition of the baby's head, grown to an enormous size, materializes in the apartment. The planet explodes, and through the hole in it we see the Man in the Planet struggling with his machines. Henry is then seen with eraser shavings billowing around behind his head. The last scene features Henry being embraced by the Lady in the Radiator. They are bathed in white light, and white noise builds to a crescendo, then stops as the screen goes black, and the credits begin to roll.
