A teenage boy named Zach Cooper and his mother Gale move into the town Madison, Delaware, to live with Zach's aunt, Lorraine. There, Zach befriends his neighbor, a girl named Hannah. However, Hannah's father, Mr. Shivers, warns Zach to stay away from them.
One night, Zach overhears an argument between Hannah and Mr. Shivers in their house and notifies the police. However, Mr. Shivers reassures the police that no incidents had taken place. Nevertheless, Zach, concerned for Hannah's safety, tricks Mr. Shivers into going to the police station for more questioning, then breaks into his house, along with his friend Champ. Inside the house, the two discover several Goosebumps manuscripts. Zach accidentally opens one, releasing the Abominable Snowman of Pasadena. Zach, Champ and Hannah pursue the Abominable Snowman to an ice skating rink, where it is imprisoned by Mr. Shivers.
Mr. Shivers reveals that he is Goosebumps author R. L. Stine, and had created the monsters as a child to terrorize his bullies, but was forced to imprison them when they became uncontrollable. Arriving back at his house, the group discover that Slappy the Dummy from Night of the Living Dummy has escaped his manuscript. Slappy steals the other manuscripts and releases the other monsters, burning the manuscripts to prevent Stine from re-imprisoning them. As the monsters rampage through town, Zach convinces Stine to write a new book to capture them, but he can only do so with a special typewriter at the high school. As they journey to the high school, Zach witnesses Hannah glow blue in the moonlight and realizes she is not actually human. After escaping the monsters and reaching the high school, Stine confesses that Hannah is a Goosebumps character he created to cope with his loneliness.
The monsters lay siege to the high school, forcing Zach, Hannah and Champ to rally the student body in fending them off. Stine finds the typewriter and begins writing the story, but before he can finish it, Slappy arrives and breaks his fingers with the typewriter case. Stine, Zach, Hannah and Champ flee the high school, pursued by the monsters, and Stine forces Zach to finish writing the story. They arrive at an abandoned amusement park, where Zach manages to finish the story. However, he is reluctant to use it to imprison the monsters, knowing Hannah will be sucked in as well. However, Hannah accepts her fate and opens the book, causing all the monsters, including herself, to be sucked into the book.
Some time later, Stine becomes Zach's English teacher and enters a relationship with Lorraine. Zach then discovers that Stine has wrote Hannah back into reality with another book, which Stine then burns, making her permanently real. As Stine is preparing to leave the high school, he discovers that Brent Green from My Best Friend is Invisible has escaped imprisonment and, to his horror, has begun writing a new book entitled The Invisible Boy's Revenge.