The film is set in an abandoned asylum, the Vannacutt Psychiatric Institute for the Criminally Insane. The head of the facility, Dr. Richard B. Vannacutt (Jeffrey Combs), performed grotesque experiments and medical procedures on the patients, killing many in the process. The hospital was closed in 1931 after the patients escaped from their cells, killing almost the entire staff (all except 5) and burning the hospital. All the patients died, their souls rumored to be trapped there forever. Vannacutt had rigged the building with numerous iron gates, activated by cranks and levers, to serve as barriers to keep patients from leaving the building, should they escape; some of these were controlled by huge, clock-like timers that wouldn't open for twelve hours. During the fire, he released these gates, keeping the inmates, employees and the fire itself contained. After several unexplained deaths during reconstruction of the facility, it was dubbed "The House on Haunted Hill".
Evelyn Stockard-Price (Famke Janssen), a spoiled trophy wife, is in a disintegrating marriage with Stephen Price (Geoffrey Rush) ("Price", as well as Rush's appearance, is a nod to actor Vincent Price, who played the same character [Frederick Loren] in the original film), an amusement park mogul with a wicked sense of humor, each of whom would gladly kill the other. Evelyn fancies spectacular parties. Stephen leases the house from the owner, Watson Pritchett (Chris Kattan), for Evelyn's Halloween birthday bash. Evelyn gives Stephen a guest list two pages long; he shreds it to spite her and then creates one of his own. The five people who show up for the party - Jennifer Jenzen (aka Sara Wolfe) (Ali Larter), Eddie Baker (Taye Diggs), Melissa Margaret Marr (Bridgette Wilson), Dr. Donald Blackburn (Peter Gallagher), and Pritchett himself - aren't the ones he invited. Neither Evelyn nor Stephen know who they are. Despite this, Price continues the party's theme, offering $1 million to each one who stays in the house and survives until morning, with any person not making it having his money added to the pot.
Shortly afterward, the security gates are tripped, locking everyone inside and forcing them to remain there until the gates unlock in the morning. After finding a coffin with more coffins filled with guns, Sara, Eddie and Pritchett decided to take one of the guns. Meanwhile, Price scolds Carl Schecter (Max Perlich), a company employee - who has developed a series of harmless traps to scare the guests— for not letting him know he planned to pull a stunt like that. Schecter said it wasn't him who did it. Price is then convinced his wife did it somehow. Meanwhile, Pritchett, Eddie and Sara go downstairs to find a way to open the gates.
Shortly after, Melissa is killed by one of the ghosts when she wanders off into the basement of the house. It's revealed that the spirits themselves created the guest list specifically to include the descendants of five members of Vannacutt's staff who didn't die in the long-ago fire. Also, it is revealed that Evelyn and Blackburn are working together to bring down Stephen. Evelyn, who was brought back to life with a needle by Blackburn then kills Blackburn and uses his body to frame Stephen. Sara, who heard Melissa moaning in the basement, comes across an incoherent Stephen in the basement, and believing that he is Blackburn's murderer, shoots him when he approaches her. After the others return upstairs, Evelyn approaches Stephen to gloat, and Stephen, protected by a bullet-proof vest, attempts to kill Evelyn. The two scuffle down a corridor before Price violently throws Evelyn through a decaying door. Inside the rotting room, the two realize they just stumbled upon the evil core of the house that Prichett warned them about all along. The Darkness which is a dark, shape-shifting creature composed of the spirits in the house, awakens and begins to take form in between the two of them. As both come under the shocking reality that the house is really haunted, Evelyn quickly tries to sprint past the monster but is captured by the Darkness's grasp. It starts assimilating and corroding Evelyn into itself, killing her while Price watches in horror.
The Darkness emerges fully in front of Price and takes the form of newly joined Evelyn, revealing that it is composed of "everyone who died and is responsible". This force begins to pursue Price with the intention of killing all the remaining guests trapped inside. Upstairs, Pritchett, Eddie and Sara are trying to open one of the iron gates, which Eddie and Sara unsuccessfully tried earlier, on the windows when they hear Price's screams from down the hall. Pritchett investigates, and The Darkness kills him while Price temporarily evades it. Price runs through the hall while Sara and Eddie follow. Price confirms that "the house is alive" and figures that the only way to get out is to go to the attic and try to escape through there. Price runs ahead of them to find an escape route while Sara and Eddie stay behind, trying to take in what just happened. Quickly, Sarah and Eddie realize they are in danger and flee as The Darkness begins to seep through the house, manipulating the walls and shattering the floors, going full force to kill who remains.
As they are running up the stairs to the attic, Sara trips, and the Darkness uses Melissa's form to try to lure her to it. Price by then has activated a pulley that reveals an opening in the window of the attic. Eddie and Sara arrive in the attic, while the Darkness seeps up the cracks of the wooden floor. Price sacrifices himself to give Sara time to escape, but the Darkness then severs the rope holding the iron gate, trapping Eddie inside.
When The Darkness confronts Eddie about his ancestor's actions, it takes on several forms of damned spirits including Melissa & Evelyn who taunt him about his doom. Realizing he is about to be taken, Eddie screams out of desperation that he was actually adopted. As the Darkness prepares to assimilate Eddie, Pritchett's ghost suddenly appears and opens the iron gate. The Darkness is distracted by Pritchett long enough for Eddie to escape out the window to Sara safe on an outside ledge. Pritchett's ghost and the Darkness then both fade away. As Sara and Eddie sit in exhaustion over the night's events, they notice an envelope halfway through the gate. It contains five checks for $1 million each.
In an epilogue, a film is shown with the patients torturing Evelyn and Price in what appears to be "the other side", the assumption that everyone killed in the house relives death for eternity