NOTE: This spoiler was sent in by hlgask and updated by spooky Evil Twin.
The movie starts with a funeral scene. It is a rural setting and a small coffin rests besides a freshly dug grave. A man weeps over the small coffin as townspeople watch from a slight distance. The headstone for the grave gives the date as 1890-1897.
Two young girls are shown sweeping a porch. They lightheartedly dance with their brooms. Suddenly, they notice something that stops them in their tracks. It a red flower that has grown up beside the porch. Hastily they pluck the flower from the ground and bury it some distance from the house.
Cut to a scene where Edward Walker, a village elder (William Hurt), says a blessing over a communal meal at which all members of the village are present. He says we are grateful for the time we have been given. Everyone starts to dig into the food. Suddenly, howls erupt from the woods nearby. The townspeople freeze and look around uneasily, except for one young man, Noah (Adrien Brody) who giggles foolishly at the howls. It seems to be understood that the young man is not mentally healthy in some way.
There is another scene that alludes to the death at the beginning of the movie. Lucius Hunt reads a letter to the villagers asking permission to enter the forest and go to the Other Towns where medicine might be available to stop others from dying in the future from similar ailments. He believes the creatures would perceive his intentions as being noble and that they would not attack him. Lucius is not granted permission to leave Covington Woods.
Later on, Edward is walking about the village when he notices a group of children gathered quietly in a circle, observing something on the ground. He says he wishes he could keep their attention that well. Then when he realizes what it is, he asks who first came upon it. It is the bloody skinned corpse of a small animal.
In the schoolhouse, Edward tries to calm their unease. The children are convinced that Those We Do Not Speak Of are responsible for the death of the animal. Edward reassures the children that there has been no incident with the creatures for several years. They do not enter the woods, the creatures stay out of the village. It's a truce.
When another skinned corpse of a small animal is found near one of the village's orchards, a town meeting is called. A village elder named Alice Hunt insists that Those We Do Not Speak Of would not go after such a small animal, it's probably a coyote.
There is a scene where Lucius shocks Alice by saying he thinks Edward has feelings for her, since he can never get up the nerve to actually touch her. Alice also tries to persuade Lucius to stop thinking about the outside world by telling him about his father's death in the Other Towns. She wants him to understand what he is asking to do.
It is revealed that several villagers own black boxes which are never opened. In them are items related to their former life in the Other Towns. They are unwanted reminders of the past. Lucius is curious about these boxes.
There is another scene where young boys play a game near the edge of the forest. One boy stands on a tree stump near the edge while the others watch. Eventually when the boy on the stump hears crackling noises behind him, he loses his nerve and runs back to his friends.
There is a tower at the perimeter of the village where a watchman keeps vigil at night. Lucius helps the watchman one evening and they talk about the Other Towns. Lucius is curious about the outside world. The watchman says he doesn't understand why Lucius would want to go there, since they are wicked places. He thanks Lucius for helping him that evening.
Cut to a scene next day where Kitty, one of Edward's daughters, is asking permission from him to approach the man she is in love with, Lucius Hunt. Edward gives his assent but asks that she be discreet about her feelings until she's actually talked to Lucius. In the next scene, we see Kitty come to Lucius where he works and pour out her heart to him. She proclaims her love for him even though Lucius seems unreceptive and even a bit afraid of her.
When we see Kitty next, she is sobbing uncontrollably back at home; Lucius has rejected her and she is miserable. Her younger sister Ivy, who is blind, consoles her by singing to her.
Ivy is well liked in the town and gets around easily despite not being able to see. She chats with one neighbor who reveals that her sister was murdered by a gang in the Other Towns, and that is why she came to Covington Woods. Ivy is kind to Noah. We see her gently reproach Noah for slapping some village boys with a stick. She gets Noah to swear he won't ever hit people anymore and then she races with him across the meadow to a rock, where Lucius is sitting by himself.
Ivy senses Lucius is there even though she is blind; she says she can see some bright colors, and that Lucius has his own special color, though she won't tell him what it is. Noah runs off by himself. Ivy and Lucius talk about how long they've known each other and Ivy says that sometimes you act in a different way than you'd like so that nobody will know how you really feel. She remembers a time when Lucius used to hold her arm to guide her everywhere, and then suddenly he stopped doing that.
Noah reappears and he puts a tiny frog in Ivy's hand. Then he pulls out a small branch of red berries that he had stored in his pocket. Lucius and Ivy are horrified that he brought something back that is red, and Lucius realizes that Noah didn't just get the berries just now. He's had them for a while already. He realizes that Noah has been entering the woods over and over.
This prompts another round of pleading with the elders by Lucius. He points out that Noah is able to enter the woods, perhaps because of his childish innocence, which the Creatures can perceive and therefore do not attack him. Later on Ivy confronts Lucius about his desire to go to the Other Towns. She says it is noble but wrong. She then reveals that her sister Kitty, who had been in love with Lucius earlier, is now engaged to be married. Ivy doesn't entirely approve since her sister's fiancé is too concerned with his appearance. She also points out that now that her older sister is to be married, she herself is able to receive male attention. She says goodnight and goes into the house. Through the window, we see her get a blanket out of the closet. She does not notice that Noah is hiding mischievously in her closet too and smiling at her.
The next day Lucius and another villager are painting the poles at the town border yellow. Lucius wonders as he works: does he dare enter the woods. He lowers his hood and walks beyond the border. He does't get very far when he hears crackling noises. He sees some branches moving and realizes something had been there and had seen him. He leaves the forest again quickly.
That evening the watchman hears a noise from his tower and thinks its Lucius coming to watch with him again. But when he lifts the trapdoor to the tower, he sees instead a misshapen creature in a red cloak creep past. He closes the door hastily, locks it, and then goes to the tower bell and starts to ring it.
Back at the village, the sound of the bell causes mass panic. People are running everywhere to get into their homes and lock the doors and windows. We see Lucius run around a corner just in time to avoid one of the creatures. The demon is wearing a red cloak, has a long snout, and porcupine-like needles coming out of its neck.
Back at Ivy's home, her family is rushing into a trap door in their floor; but Ivy refuses to hide without Lucius. Her sister pleads with her to come inside. Ivy blindly holds out her hand and waits at the front door. Just as we see a creature coming out of the dark towards her, Lucius appears, snatches her hand and runs to safety with her. They are safely underground and we see the townspeople in their cellars as the creatures enter their houses and search for them. They growl and stomp around but find nothing as the frightened people huddle under the floors.
The next morning, there is a town meeting and everyone is talking about the red slashes that were found on the doors of each house. Edward thinks the marks are a warning from the Creatures. A sacrifice, the skinned carcass of a small farm animal is thrown into the woods as a peace offering.
Despite everything, preparation for Kitty's wedding continues. The townspeople watch as the bride and groom are blessed by a minister. That evening there is dancing at a hall which has been festively decorated. Kitty's husband complains when Ivy hugs her sister for too long, he says he hopes she will not wrinkle his suit by hugging him the same way. Alice tries to congratulate Edward on his daughter's marriage, but he refuses to shake Alice's hand.
Suddenly the dancing is interrupted by high pitched screams. Two children appear and claim to have seen Those We Do Not Speak Of in the village again and this time they left more warnings. Edward resolves they will all return home in a group for safety. Back at the village, they find corpses of dead, skinned animals hanging from their doorways. Alice realizes this could not be the work of a coyote, the doorways are too high.
The next morning a town meeting is called and Edward asks if there is anyone who has any idea why the Creatures are threatening them. One of the elders receives a note and asks who its from. Edward reads the note. The writer admits that he entered the woods and broke the truce. The note was signed by Lucius Hunt. Lucius is cowering in the back of the meeting hall. He expects Edward's wrath, but Edward is kind and tell Lucius he is fearless in a way he himself can never be.
That evening Ivy wakes because she senses a presence. She goes out to her porch and finds Lucius there. Lucius is guarding her as fog swirls all around. They talk about the game where the young men stand on the stump with their back to the woods. Ivy says she wishes she could do more boy things, she wonders if Lucius thinks she is too tomboyish. She wishes she could do the game on the stump. She understands that Lucius holds the record for standing there longest. She wonders how he can be so fearless. He says he only feels fear when her safety is threatened. As they talk, Lucius becomes irritated that she is so open with her feelings. He asks her why she always has to say what she thinks, she asks why he never does. They get over their argument and kiss for the first time.
The next morning the elders ask each villager their own account of what has happened regarding the Creatures. One villager, when she is done, asks if it's true that Lucius and Ivy are engaged. Alice Hunt says yes.
Ivy asks Kitty, who was in love with Lucius before, if she is against her and Lucius being married. Kitty gives the couple her blessing.
Next we see Lucius working in his shop. He turns around because he hears the door open. It's Noah. Lucius says a few words to Noah, turns back to his work, and then turns back, to find Noah standing toe to toe with him. He looks down and realizes Noah has stabbed him. Lucius collapses and Noah doesn't know what to do. He thinks about running away, but then he kneels and stabs Lucius again.
Noah's parents come out of the house and find Noah on the porch, covered in blood. Word gets around the village, but nobody knows whose blood it is. Ivy hears and heads immediately to find Lucius. She goes to his workshop and finds him on the floor. She cradles him in her arms; behind her, the villagers are gathering. Edward comes in and Ivy tells her father that she can't see Lucius color anymore. She starts to scream as she is led away. Lucius is put to bed and his wounds are closed, but an infection sets in. Ivy visits Noah, who has been locked up. She slaps him over and over until she is restrained and led away. Noah screams out his grief behind his locked door.
Ivy realizes the only way to save Lucius is to go to the Other Towns and get medicine. She pleads with the elders for permission to leave. Edward discusses the predicament with the other elders. He asks them if there is anything they can do to save Lucius. The other elders are reluctant to admit that the only way is with the help of the outside world. Edward finally decides that Ivy must go and do what she can to save her fiancé.
Before Ivy leaves, Edward wants to show Ivy something. He takes her on a walk and asks if she knows where they are. She says at the abandoned old shack that nobody is allowed to use or enter. She is right; Edward goes and unlocks the door, and warns her to try not to scream.
Cut to the next scene, Ivy is packing a bag. Edward gives her a piece of paper with the names of certain medicines written on it. She is ready to go. She enters the woods accompanied by two boys who are there to guard her. But one quickly loses his nerve and returns to the village. Ivy claims she has magic rocks in a bag that will protect them. It starts to rain and Ivy and the other boy make a shelter to sit it out. The boy hears crackling around them and realizes they aren't alone. He loses his nerve and decides to leave Ivy there, too. He says the monsters won't attack her since she can't see them, and leaves. Ivy pours out the magic stones onto the ground and sets off by herself. We see her holding her ears so she won't hear the crackling in the brush all around her that night.
There is a flashback where Ivy enters the unused shack with her father. She says it smells funny in there and he tells her what he wants to show her is straight ahead. She walks forward and puts her hand out and feels a claw. She gasps and realizes it is Those We Do Not Speak Of. Edward confesses that the whole thing is a ruse to keep the world out. He says there was a legend about creatures in the woods that the elders read about and decided to use to their own advantage. He tells her this so she won't be afraid in the woods. He tells her each of the elders suffered a tragedy in the outside world. His own father, who was a very, very rich man, was murdered in his sleep.
Ivy is going through the woods by herself when she comes to a place where the ground drops off. She stops, but the ground gives way beneath her. She holds onto the edge of a pit that was formed under a tree that was knocked over. She is covered with mud but is able to climb out.
Back in the woods, Ivy is being chased by someone or something. Her father's voice rings in her mind that they had taken an old legend and made it their own. Ivy is shown standing in a clearing filled with berry brambles, red, the evil color, all around. She senses another presence, and the camera pans around to show one of the Creatures standing close by. It is growling and breathing loudly. Ivy hides behind a tree and we see the Creature approach from the other side. Ivy runs away but the monster keeps stalking her. Finally, Ivy returns to the place where she had almost fallen into the pit. She stands at the edge of the pit and holds out her arms and waits. The Creature can be seen charging at her from behind. At the last moment, Ivy moves away and the Creature falls into the pit.
Back at the village, Noah's parents unlock the door where Noah is imprisoned and find him missing. He has escaped through the floor of the house where he took some boards away. A costume of one of the Creatures was hidden there, and that is also missing.
We see Noah in the pit, wrapped up in the costume of one of the Creatures. He dies from his injuries he suffered in his fall.
Ivy keeps on her journey and eventually finds a gravel road. She takes off her yellow cloak and runs down the road as quickly as she can. Eventually she runs into a wall which she has to climb over.
Back at the village, Edward unlocks his black box. There is an old picture in the box, surprisingly it is a group picture of all the elders. They are dressed as if they have come from a time far in the future.
There are voice overs of the elders telling their horrible stories of the real world. Edward introduces himself as a professor that teaches American History at the University of Pennsylvania, and that he has an idea to share with the other elders.
We see Ivy climbing down the other side of the wall as a jeep approaches. A young man gets out of the jeep, which has the name Walker on the side. He tells Ivy this is a private reservation and she is not supposed to be here.
Ivy pleads with him to get her some medicine so she can take it back over the wall. She shows him the paper with the names of medicines written on them. He finds it hard to believe when she claims to live in the woods. She asks him his name, which is Kevin and she says that he has kindness in his voice, which she does not expect. Kevin says that they have guardshacks every ten miles with medical supplies incase of animal bites. Shes give him Edward's watch as payment and tells her to stay there. He asks what her name is and she introduces herself as Ivy Elizabeth Walker.
Back at the ranger station, Kevin makes up a story about some teenager's getting lost. Kevin's boss (M. Night Shyamalan) berates him for talking to trespassers. He tells him just to mind his own business and things will be ok. Kevin agrees with everything he says, then secretly gets medicine and other items from the shelves for Ivy. He takes a ladder back to where she is and helps her get back over the wall, then sits there and thinks about what she said.
Word gets out that Ivy has returned. One villager passes by where all the elderlies are with Lucius in a house and he mentions that she has return and was attacked by a creature and that she killed it. They all know it was Noah who she killed and Noah's parents cry over his death. Edward says they will find his body and give him a proper burial, and that they will claim the Creatures killed him. He says Noah has given them a way to lend credence to their story. Edwards asks them to basically vote if they want to continue with the way they live and everyone stands up to agree, even Noah's parents. Just then, Ivy walks in with the medicine. She goes to the bed side, holds his hand and says that she's back and then the credits roll.