Set ten years from the present and from the fifth film, it is 1999 and Freddy Krueger has managed to kill every child in Springwood, Ohio, though it is hinted that one child survived.
A teenager hoping to escape Springwood by plane is suddenly ejected from it and awakens in a house across from 1428 Elm Street, and he tries to make it to the border on foot. Freddy then uses the blunt force of a bus to send the teenager flying through the barrier between Springwood and reality, causing him to strike his head. Freddy then tells him to “be a good little doggy and go fetch!”. The teen, called John Doe, awakens with amnesiaand wanders into the city with nothing but caffeine pills and a newspaper article of a woman, Loretta Krueger, looking for any clues as to who he is. Police mistake him for a runaway junkie and deliver him to a youth shelter for troubled teens. At the shelter, he meets Maggie Burroughs, who examines him, and Doc; a resident psychologist who also tells Maggie to face her own problems with a recurring dream which is somehow linked to the article John brought in. Maggie’s other charges are Carlos; who was physically abused by his mother, ending up with a hearing impairment, Spencer; a drug addict from a privileged family who rebelled against the controlling nature of his abusive father, and Tracy; a girl who was sexually abused by her father. Maggie takes the shelter van to go to Springwood, and when a nightmare warns John to go back, he forces her to stop abruptly, revealing that Carlos, Spencer, and Tracy hiding in the back of the van.
In Springwood, they discover the town’s adult population has gone insane, and that there are no kids. Maggie orders the three teens to return to the shelter while she and John investigate, but soon they become lost in a loop by some unseen force preventing them from leaving the town. At the school, they find the origin of the article and learn that Freddy had a child, who was taken away after Freddy’s murder trial. At the local town orphanage, the matron recognizes John and Maggie and John suspects that he is Freddy’s child, but Maggie doubts his suspicions as she recognized her as well. The teens enter an abandoned neighborhood after giving up trying to leave town and enter a house that reveals itself to be 1428 Elm. Carlos goes upstairs for some sleep and finds himself trapped in his old neighborhood, where he is attacked by Freddy disguised as his mother and has his hearing aid removed. After getting it back from Freddy, the hearing aid becomes a creature that amplifies all sound. Freddy then uses his claws on a chalkboard, causing Carlos’ head to explode. His disappearance confuses Tracy who leaves Spencer to find Maggie. Spencer enters a drug-induced sleep and is woken up by a no drugs commercial guy (Johnny Depp reprising his role as Glen Lantz) but the guy is hit with a frying pan by Freddy who puts Spencer in a video-game nightmare where his dad and Freddy are the antagonists. Discovering Spencer bouncing around the house and running through walls, John forces Tracy to knock him out to enter his dream, she then follows through meditation, but they are too late and Spencer is thrown into a deadly pit before they or Maggie can stop him.
Unable to revive John, Maggie and Tracy take the van with him in tow, but Freddy manages to kill John by dropping him on a bed of spikes. As he lays dying, he tells Maggie that Freddy’s child is not a boy. Returning to the shelter, Maggie finds her boss does not remember Carlos or Spencer, but Doc does as he can control his dreams. Maggie confirms her suspicions that she was adopted, but her mother does not know anything about her parents. She confronts Freddy in her dreams who confirms she is his daughter, and he used her to take him to a new town to kill children. His first target is the youth shelter, which exists on “Elm Street”. Tracy has a nightmare where her father comes after her, but she turns on him, brutally beating him. Before Freddy can kill her however she wakes herself up by burning her arms on a stove. Doc also encounters Freddy and brings out a piece of his sweater when he wakes up, deducing that he can be dragged into reality. Maggie volunteers to go, receiving special glasses to see past Freddy’s tricks. She witnesses his childhood, in which he grew up teased by his peers for his sociopathic tendencies, and killing his stepfather as a teenager, then witnessing his death where a pair of demons granted him his power to cross into the dream world before confronting him. She wakes up, but Freddy does not appear. As things appear to her as they did in her dream, she suspects it’s not over yet.
Finding Freddy in a storage room, he appears human and begs Maggie for forgiveness before revealing he’s kept his supernatural powers. Using the storage of weapons at her disposal, Maggie knocks Freddy’s glove off and injures him badly, she puts the glove on and then stabs him with it. Tracy throws Maggie a pipe bomb, which she shoves into Freddy’s chest and tells him, “Happy Father’s Day.” and kisses his cheek, before she and her friends escape. Trapped to the wall, Freddy breaks the fourth wall by looking at the camera and lamenting, “Oh…kids,” before blowing up. After he blows up, three dream demons laugh happily and fly away. Maggie’s dream glasses reappear and she proudly proclaims, “Freddy’s dead.”