Drifter "John Nada" (Roddy Piper) finds construction work in Los Angeles and befriends fellow construction worker Frank Armitage (Keith David), who leads him to a local shantytown soup kitchen. There, Nada encounters strange activity around the church: a blind preacher (Raymond St. Jacques) loudly chastising others to wake up, a police helicopter hovers overhead, and a drifter (George Buck Flower) complains that his TV signal is continually interrupted by a man warning everyone about those in power. Nada discovers the nearby church is a front. The choir heard outside is an audio recording and the building is filled with scientific equipment and cardboard boxes. Nada finds a box hidden in the wall, but flees when the preacher notices him. That night, the police attack and bulldoze the shantytown. Nada returns in the morning to find the church empty, but with the hidden boxes still in the wall. He takes one of the boxes and in an alley, he opens the box and finds it filled with sunglasses. Taking a pair, he hides the box in a garbage can.
Nada quickly discovers the sunglasses have unique properties: they reduce the colors of the world around him to black and white and allow him to see that media and advertising hide omnipresent subliminal commands to obey, consume, reproduce, and conform. They also make clear that many people in positions of wealth and power are actually humanoid aliens with skull-like faces.
In a grocery store, Nada confronts an alien woman who then speaks into her wristwatch, notifying others about him. Two alien police officers try to apprehend Nada, but he kills them and takes their guns. He goes on a shooting spree, killing several aliens that he encounters in a nearby bank. He sees one vanish using its wristwatch. Nada escapes, destroying a small, flying saucer-like alien surveillance drone and taking a Cable 54 assistant director named Holly Thompson (Meg Foster) hostage. At her luxurious hill-top home, Nada tries to convince her of the truth. He also begins suffering migraine headaches as a result of using the glasses. Holly finds his story absurd, and catching him unaware, knocks him through a window and calls the police. Nada tumbles down a steep hillside and escapes, leaving his sunglasses behind.
Now a fugitive, Nada returns to the alley where he finds the garbage can that held the other glasses is empty. However, he retrieves the box from a nearby garbage truck. Frank meets Nada, who is now a wanted fugitive, to give him his paycheck. Though Nada tells his story, Frank does not believe him and tells Nada he wants nothing further to do with him. Nada engages in an extended street fight with Frank, trying to force him to put on a pair of sunglasses. Finally after gaining the upper hand, Nada places the glasses on Frank who now understands. The two rent a hotel room to discuss their predicament. Gilbert (Peter Jason), a member of the shantytown, discovers them and notifies them about a secret meeting with other activists.
At the meeting, Nada and Frank are given special contact lenses to replace their sunglasses. They learn from the bearded man's broadcast that the aliens control Earth as their third world, depleting its resources and causing global warming before moving on to other planets. The aliens use a subliminal signal broadcast into people's brains to camouflage themselves. Destroying its source will allow everyone on Earth to see their true form. Frank is given a stolen alien wristwatch which functions as a communications and teleportation device. Holly arrives joining the cause before apologizing to Nada. However, the police suddenly attack the meeting, killing everyone while Nada and Frank manage to fight their way out. After being cornered in an alley, Frank accidentally opens a temporary portal by throwing the watch, through which the two jump into a network of underground passages.
The two find the aliens in a grand hall celebrating with their elite human collaborators. The same homeless drifter that Nada and Frank met earlier appears as a collaborator and believes the two to be collaborators as well. He takes them on a tour of the passages, revealed to link the alien society including a space travel port. A further passage leads to the basement of the Cable 54 station, the source of the aliens' signal. The two then launch an attack, killing many alien soldiers. Nada and Frank fight their way through the building to find the broadcaster on the roof before meeting Holly and taking her along. As Nada climbs up a staircase to the signal broadcaster disguised as a satellite dish, Holly suddenly shoots and kills Frank off-screen, finally revealing herself to also be a human collaborator.
Holly takes aim at Nada and persuades him to stop as an alien-manned police helicopter hovers overhead. Nada complies by dropping his weapon, but then retrieves a hidden pistol from his sleeve and kills her. He then shoots and destroys the broadcaster before being fatally wounded by the aliens in their helicopter. Before he dies, Nada gives them "the finger" as his last defiant gesture now that he scored the final victory over the aliens. With the signal destroyed, humans all over the world discover the aliens in their midst and the film suddenly ends.
