“Wherever evil brews in Tromaville, you will find the Toxic Avenger!”
Melvin Ferd (Mark Torgl) is a stereotypical 98-pound weakling. He works as a janitor at a health club in the fictional town of Tromaville, New Jersey where the customers—particularly Bozo (Gary Schneider), Slug (Robert Pritchard), Wanda (Jennifer Babtist) and Julie (Cindy Manion)—harass him constantly. His tormentors get more and more violent until he is tricked into wearing a pink tutu and kissing a sheep. He is chased around the health club and out a second story window. He lands in a drum of toxic waste, which sets him on fire. After running down the street in a ball of flames, Melvin douses the flames in his bathtub. The chemicals cause him to transform into a hideously deformed creature of superhuman size and strength.
A group of drug dealers, led by the criminal Cigar Face (Dan Snow), are harassing a police officer by the name of O’Clancy (Dick Martinsen), trying to buy him off. When he refuses to accept the money, Cigar Face and his gang prepare to castrate Officer O’Clancy. A large creature comes out of nowhere and violently kills the criminals, then leaves a mop on their faces as a call sign. Officer O’Clancy is initially terrified of the creature but soon learns he was only trying to help and will not hurt him.
The officer’s rescuer, dubbed the Toxic Avenger, is Melvin after having been transformed by the incident. He tries to return home but his mother is terrified of him and will not let him in the house. The Toxic Avenger builds a makeshift home in the junkyard.
Elsewhere in Tromaville, a gang of three men are holding up a Mexican food restaurant. The men kill one of the patrons, and attack a blind woman named Sarah (Andree Maranda). They kill her guide dog and attempt to rape her, but are stopped by the Toxic Avenger. Toxie wreaks bloody vengence on the three men. The Toxic Avenger takes Sarah back to her home, where they begin to get to know one another and subsequently become involved.
The Toxic Avenger returns to the health club. There, he attack popular girl Wanda in a sauna and burns her on the heater. Afterward, Toxie is relieving himself in a back alley when a limo pulls up and a pimp tries to push a 12-year-old girl onto him. When he starts to fight back to save the girl, a group of men come out of the limo; he fights them all off and saves the girl. The Toxic Avenger returns to the health club and attacks the other tormentors who were responsible for what happened to him. He then confronts his archenemies Bozo and Slug, ending in Slug getting thrown out of a moving car and Bozo driving off the side of a cliff.
The leader of the crime ring in Tromaville, who turns out to be Mayor Belgoody (Pat Ryan Jr.), is horrified of what is happening to his goons. He is worried that it will lead back to him and wants Toxie to be taken care of. A group of men, lead by Cigar Face, surround Toxie with guns. Before they fire on him he jumps up to a fire escape, and they end up shooting each other.
When the Toxic Avenger kills a seemingly innocent old woman in a dry cleaning store (she is in fact a leader of an underground white slave trade), Belgoody uses this opportunity to call in the National Guard.
Back in his junkyard home, the Toxic Avenger is terrified of what he has become. He and Sarah decide to move away from the city and take a tent into nearby woods. They are not there long before they are discovered. The Mayor and the National Guard come to kill him but the people of Tromaville will have none of it. The Mayor’s evil ways are revealed, and the Toxic Avenger proceeds to rip out Belgoody’s organs to see if he has “any guts”.