The duo of mogwai and man have escaped to the deserts of west Texas, far from precipitous weather and populous cities. We see Billy, a mountainman look of thick hair and thick beard, at a small bar in town, his once a month visit to have a beer, check his mail, and hear about the state of the world he left behind.

As he reads a letter from Kate asking him to leave Gizmo behind and come home, a news bulletin comes on the television above the bar. There are reports of strange lights in the skies and earthquakes worldwide. One earthquake unearthed a mysterious temple in China under the Forbidden City. Inside are dozens of scrolls referencing personal warriors to defend all the nation’s families. There are sketches of the tiny warriors and instructions for their use, but the Chinese government is keeping those details private.

As the dust trail fades we see Billy get out of his aging, rusted truck and enter his home, an old storefront in a ghost town, complete with broken boardwalks and empty horse corrals. Inside the dank wood structure of dust and cobwebs, Billy crosses behind the counter to reveal an electronic keypad behind a wooden panel. The panel says “Peltzer, a Clamp Industries company.”

When the door opens we’re taken on a tour of a home and laboratory. Newspaper clippings and glass case product displays tell us a history of Daniel Clamp praising Billy for saving his building and the city, the construction of Clamp Corners, the small business support program, Peltzer Inventions being its first financially-backed company. We see original and sleek new versions of the bathroom buddy, the peeler juicer, the electric hammer, and finally the Pet Communicator, a tiny helmet with wires and antennae sprouting from it.

At the end of the displayed inventions hangs a picture of Billy’s dad with a plaque underneath. It reads: “’If necessity is the mother of invention, then curiosity is its father.’ – Randal Peltzer”

Billy shouts for Gizmo as he enters the lab. Passing tables of half-finished gadgets, then beakers and jars of chemicals, he sees a mogwai in a hazmat suit hunched over a microscope. When Billy gets the mogwai’s attention, we see that it’s not gizmo. Billy asks where his friend is and the mogwai, Kevin, points him to a thick metal door with a red light above it.

Gizmo emerges, his fur grayer, his belly slightly thicker than we last saw him. They observe a new batch of mogwai encased behind thick glass. They’re wild, unhinged, and dangerous. Gizmo rejects the batch, and the mogwai’s are moved into a caged area for further testing. Nearby is an intermediate room with recently-opened cocoons. The next room over is a thicker line of cages, each housing odd-looking Gremlins, a giant angled mirror overhead.

Billy picks up a pet communicator helmet, the same worn by all the mogwai, and asks him to put it on. Gizmo refuses. Billy points out the handful of tame mogwai lab assistants Gizmo has made and questions what his friend is trying to achieve with his experiments. Appearing defeated, Gizmo grabs a beer and leaves. Accessing a much lower electronic keypad, Gizmo leaves the protected bunker and goes for a walk through the ghost town.

It’s nighttime. Billy puts the other mogwai into their cages. Billy briefly tinkers with an invention, then stares longingly at a picture of Kate. Gizmo empties his bottle of beer and stares up at the night sky. Just as he decides to return home, fiery objects crash to Earth in the distance. Gizmo runs home to tell Billy.

The next day Billy heads back to town. The shops are demolished except for the church and the bar, which are boarded up using pieces of the other buildings. Inside both are the townsfolk, armed to the teeth and scared out of their minds. They let Billy in and the news shows an alien invasion, and the Texas townsfolk have prepared to defend themselves. Cities worldwide are under attack and losing to the alien hostiles except for regions of China. They appear to have a secret weapon, and satellite images of China show a huge number of torches and lights throughout the nation.

Billy tries to reach Kate and his mom in New York but the lines are down. He heads back to the ghost town to tell Gizmo he has to go to save his loved ones, when the aliens descend on the small Texas town. Billy and Gizmo initiate defensive measures and we see the ghost town bathed in bright lights. In addition, every building is rigged with lethal inventions designed to kill the Gremlin creatures, had they ever managed to escape the lab. The defense system conveniently serves to kill aliens just as well, but the aliens are relentless. It’s obvious they’re hell-bent on destroying life on earth and last resorts must be taken. As the aliens are smashing through into the bunker, Gizmo and Billy lock themselves and the mogwai in the steel-walled testing chamber and purge the Gremlin cages, letting the destructive monsters out into the ghost town.

They can hear the screams of both aliens and Gremlins being slaughtered.
In the morning, the hostiles are gone, corpses of the fallen all over the lab, ghost town, and surrounding desert. Billy, still determined to go to Kate, says they’ll need an army clearing their path if they want to reach New York. He begins constructing tiny helmets and Gizmo enters the multiplication lab. Inside is a kiddie pool of water, and Gizmo jumps in.

A montage of breeding, feeding, cocooning, and gadget-building goes by and hours later there is a room full of armored Gremlins, their talons exposed and, with their helmets on, they are under Billy’s control.

They get in the truck, Billy’s Gremlin army in the bed and they head to town. They stop to see that some of the people from the bar and church also made it through the night, and Billy stops in for help. He says he can help them survive, but they have to help him get to New York. A select few take helmets and each get a personal Gremlin to control.

A small group moves northeast, killing aliens in their path. During the day, dark visors drop over the heads of the Gremlin warriors, but as the humans sleep through the nights, something disconnects from one of the little helmets and they lose some of their crew, human and Gremlin. Catching radio broadcasts they hear that New York is a wasteland, but the tides have turned in Asia as an opposing force has beaten back the aliens.

Eventually the US-based group meets with the force out of China. They’ve come to help, and we see who ‘they’ are. A variety of men and women, each with little mogwais on their shoulders join with Billy, Gizmo, the Texans, and some folks they picked up along the way. The leader of the China force explains how these mogwai were protected for generations underground, meant to be a failsafe defensive measure in case the Chinese people were ever threatened with annihilation, but the mogwai warriors were forgotten.

What makes them special is that there are females among them, and they breed to create kind and helpful mogwai that care for humans and seek companionship. Billy says that’s great, but mogwai aren’t warriors. Then when aliens come at the crew we see what else makes these mogwai special. They transform into Gremlins at will and kill the aliens with ease, then return to their gentle mogwai state.

The group moves on to New York. Kingston Falls is destroyed but Billy finds Kate alive and well in the Futterman’s old bunker. We move forward to see Billy and Kate together, Gizmo and a mate together, and they’re all happy. Humans are rebuilding, each with a mogwai by their side, Randal Peltzer’s vison of a Peltzer Pet in every home fulfilled.