The film begins with Leatherface (R.A. Mihailoff) bludgeoning a young woman to death with a sledgehammer before beginning the process of cutting off her face in order to make it into a mask. Another girl, Sara (Toni Hudson) watches from a nearby window. Leatherface hears Sara outside, and after she flees, he briefly checks outside before going back to work. Some time later, Michelle (Kate Hodge) and her boyfriend Ryan (William Butler), both traveling through Texas, pass through a security checkpoint near the excavation of a large number of butchered bodies and reach the Last Chance Gas Station. At the station, they meet a hitchhiking cowboy named Tex (Viggo Mortensen) and the station's perverted owner Alfredo (Tom Everett). Tex shows Ryan a route on the map that can get them to a town. A fight soon breaks out between Tex and Alfredo when Tex finds the latter spying on Michelle while she uses the station washroom. As Michelle and Ryan flee from the station in their car, they witness Alfredo apparently killing Tex with a shotgun.
As night falls, Ryan and Michelle, having taken the route Tex recommended, become lost. As they begin to bicker, a large truck appears and the driver attacks them. Ryan pulls over when the unseen driver throws a dead coyote at their windshield. As Ryan changes the car's flat tire, Michelle, hears a noise, and Leatherface ambushes the two of them. They climb into the car as Leatherface begins hacking at it with his chainsaw, before bumping Leatherface with the vehicle and driving off.
After their escape from Leatherface, Michelle and Ryan - as well as another driver, a survivalist named Benny (Ken Foree) - crash when a bloodied Tex leaps in front of the car. As Benny tends to Michelle, Ryan explains the situation to him, showing him the damage caused to their car by Leatherface, before Michelle awakens. They decide to find Tex, and on the way, Benny discovers a hook-handed man named Tinker (Joe Unger), who offers his assistance in setting down road flares. Benny soon realizes Tinker's real intentions after he finds a damaged chainsaw in the back of his truck. Benny then grabs an automatic rifle from his overturned jeep, retreats, and encounters Leatherface when Tinker attempts to ram him with his truck.
As Benny fights Leatherface, Sara, who had earlier escaped Leatherface, saves Benny from death by luring Leatherface away, before re-joining Benny. After questioning Sara, Benny learns that her entire family has been killed. She tells him that she has failed to escape as Leatherface and his family have been watching the roads. Benny hears Michelle and Ryan calling for him and leaves Sara; she is killed a short time later by Leatherface. After killing Sara, Leatherface stalks Ryan and Michelle, mutilating and capturing Ryan when he is caught in a bear trap.
After Ryan tells her to run, Michelle finds a house, and finds a little girl (Jennifer Banko) inside who has a room filled with the remains of various animals. The girl stabs Michelle with a knife before Tex enters the room and restrains her, bringing her into the kitchen and nailing her to a chair, introducing her to "Grandpa", a withered corpse to whom the family feeds blood. After Mama (Miriam Byrd-Nethery), an elderly woman appears, Michelle begs her for help, but is ignored. Tinker appears in the doorway, dragging the badly injured Ryan, whom he and Tex proceed to suspend upside-down with a pair of meat-hooks. Michelle begins screaming uncontrollably, forcing Tex to gag her. When Leatherface returns home, Tex gives him a large golden chainsaw with the phrase "The Saw Is Family" engraved on it, a present made by Tinker. Outside the family home, Benny finds and attempts to interrogate Alfredo as he disposes of human bodies in a bog, but he unsuccessful, eventually knocking Alfredo into the bog and leaving him to drown.
As the family prepare for dinner in the kitchen, the little girl kills Ryan with a sledgehammer-swinging device that Tinker has made, and Leatherface prepares to kill Michelle as well. The noise of Leatherface's chainsaw attracts Benny, who opens fire on the house with his rifle, killing Mama, blowing off two fingers on Tinker's hand along with his ear, and partially destroying "Grandpa"'s body. The gunfire knocks Leatherface to the floor, allowing Michelle to tear herself from the chair she is nailed to, stabbing Tex, before joining Benny outside.
When Leatherface drives towards them in Tinker's truck, Benny tells Michelle to run to the woods. He tries to shoot Leatherface, but realising he has run out of ammunition, the truck hits him. Benny is stunned, and Leatherface exits the truck, grabbing his chainsaw before going after Michelle. As Leatherface stalks Michelle, Tex and a recovered Benny begin fighting, a battle which ends with Benny soaking Tex in fuel and burning him with a lighter. Benny rushes to Michelle's aid, stopping Leatherface from murdering her, and knocking the killer into the bog. The pair begin fighting, and Benny appears to die when Leatherface forces his head into the blade of the chainsaw. He then turns his attention to Michelle, who grabbing a nearby rock, beats him over the head with it, leaving him unconscious under the water.
As dawn breaks, Michelle reaches the main road and rests on an abandoned tire, before Alfredo's pickup truck, driven by Benny, stops in front of her. As Benny helps her into the truck, Alfredo appears and attacks him from behind with a sledgehammer. He avoids Alfredo's attacks, and Michelle shoots Alfredo in the chest with a shotgun, before the pair drive away, unaware that Leatherface is revving his chainsaw some distance away.