The movie starts off with Tory and her father, J.D., moving into a small run-down house in the countryside. Tory complains about the living conditions and ends up upsetting her father. Before she can attempt to leave, she bumps into Nathan Murphy, who was arrived to repaint the house along with his little brother Alex and friend Ozzie.
Tory decides to stay when Nathan challenges her bravery and they start to get along with each other. While painting the house, Tory feels a hand on her leg. At first, she thinks it's Nathan, but when she sees him behind her, she jumps up and ends up getting scratched by the Leprechaun (who Ozzie said to have encountered in the cellar earlier).
After that, J.D. gets bitten on the hand and she, along with Nathan, Alex and Ozzie, drive him to the hospital. Tory is upset about having to be in the house alone, but manages to cheer up a little while spending time with Nathan. They go to a diner in town, where she complains about the meats on the menu. After getting to know each other a little more, they reunite with Alex and Ozzie and head back to the house.
It is there that they encounter the Leprechaun, who attacks them. They run around the house several times, Nathan injures his foot with a beartrap, Ozzie gets his ear bitten by the Leprechaun and the paint truck is toppled over a make-shift vehicle. After Ozzie tells them about the gold he and Alex hid in the well, Tory goes out to retrieve it and give it to the Leprechaun, hoping that it will leave them alone, but it turns out that there is still one coin missing (which Ozzie had accidentally swallowed).
After believing that they are in the clear, Tory and the others are attacked by the Leprechaun again. After more close calls, Ozzie suggests asking Dan O'Grady, the former owner of the house, for advice on how to kill the Leprechaun. Tory agrees to drive J.D.'s car to the retirement home where O'Grady lives while Nathan, Alex and Ozzie distract the Leprechaun by throwing their shoes at it. With that, Tory manages to drive away while the others run back into the house.
Arriving at the retirement home, Tory finds the security guard asleep, so she looks at the apartment book and heads off to O'Grady's room. She finds what she assumes to be O'Grady, but it turns out to be the Leprechaun, having followed her. She runs into the elevator, where O'Grady himself crashes through the roof. O'Grady tells her that 4-leaf clovers can kill the Leprechaun and that they can be found in the clover field near the house before dying from his injuries.
Tory heads back to the house, but the Leprechaun confronts her and chases her. She finds a police car and, thinking that she can get help, runs towards it, only to find the cop inside dead. The Leprechaun appears on the other side of the car and traps Tory inside. She manages to stick the cop's baton in the Leprechaun's eye, but it simply rips out one of the cop's eyes and replace it as its own. Before it can kill Tory, Nathan arrives and shoots it with a shotgun.
After making it back to the house, the group heads over to the clover field, but the Leprechaun attacks Tory and gets her to the ground. Before it can kill her, Ozzie informs it of the gold coin in his stomach and runs off, giving Tory enough time to find a 4-leaf clover. She then gives it to Alex, who sticks the clover in a wad of gum and shoots it into the Leprechaun's mouth with his slingshot.
Weakened, the Leprechaun falls down the well, but it tries to come back up, only to get knocked back down by Nathan, who then pours gasoline down the well and lights it ablaze, finally defeating the Leprechaun and ending the movie.