In the Punishment Dome on the mining colony Varos, a young rebel named Jondar is chained to the wall, trying to evade the beams from a random laser emitter. Elsewhere, the miner Arak and his wife Etta watch the torture on their home video screen and discuss the disappointing quality of recent broadcasts. Arak is even less impressed with the quality and quantity of his food ration, and when he learns there are more shortages to come he decides to vote against the current Governor once his chance comes up. He asks Etta to vote for him while he catches up on his sleep, but she refuses to do so and threatens to report him if he doesn't vote.

The Governor of Varos meets with Sil, the alien representative of the Galatron Mining Corporation, and trying to negotiate a fair price for Varos' only export, zeiton-7 ore. The Governor has considered branching out into sales of tapes from the Punishment Dome, where the torture and execution of political prisoners is recorded and broadcast as a warning to miscreants everywhere. Sil, obscenely delighted by the concept of such videos, offers to organize exports if the Governor lowers the price of zeiton-7. Negotiations are at a standstill when the Chief Officer arrives to lead the Governor to the voting chamber; should the people of Varos disagree with his policies he will be obliterated. Sil has been making secret payments to the Chief Officer to ensure that this stubborn Governor is replaced, but it's taking too long and he's beginning to consider using other methods to get what he wants.

The Doctor is completing repairs to a minor part of the TARDIS console when the central column suddenly halts. The Doctor, realizing that the TARDIS has run out of power, sinks into a lethargic state of despair and tells Peri that there's no solution to this problem. The TARDIS will be stuck in the middle of nowhere forever while its occupants age to death.

The Governor addresses his people, trying to convince them that he's fighting the Galatron Mining Corporation's exploitation on their behalf; if they will accept a further reduction of the food rations they can hold out for a fair price for their only export. But the vote goes against him by a margin of over 300,000, and he is strapped into his chair and bombarded with cell disintegration rays. He manages to survive this, his third losing vote in a row, but the next will surely kill him. The Chief privately advises Sil to continue with negotiations while the Governor is in a weakened state, but the Governor can barely speak and needs at least a moment to recover. One of his officers, Bax, suggests buying time by giving the people what they want and authorising Jondar's public execution. Bax has an idea for a new execution method -- by neutralising the Q-switch on the random laser emitter, all the energy will build up into one focussed blast, and although the actual death will be quick, the tension and uncertainty as to when it will occur will make the video of Jondar's execution a best-seller. The Governor, still trying to regain his strength, authorises the execution. At Peri's insistence, the Doctor listlessly leafs through the TARDIS manual, and as he does so the console column moves slightly, indicating the presence of vestigial power in the circuits. Galvanised, the Doctor leaps out of his seat and operates controls on the console, transferring just enough of the vestigial emergency power to make one trip. In order to replace the transitional elements and get the TARDIS working again he requires the extremely rare ore zeiton-7, which can only be found on the planet Varos in the constellation of Cetes. He programmes the co-ordinates into the console, but is aware that if he misses the planet's mining era he and Peri will be stranded there forever...

Jondar's wife Areta is also a prisoner in the Punishment Dome, guarded by Jondar's former friend Rondel. Rondel now serves with the guards and tries not to listen to Areta, who insists that Jondar is being tortured and executed because he discovered the truth about their world; Varos was once a prison planet for the criminally insane, and the officer elite still live in luxury and rule through fear while the working class toils endlessly without hope. Quillam, the man who runs the Punishment Dome, arrives to gloat over Areta's fate; once she goes through his experimental transmutation process the dark corners of her mind will be amplified and given physical form, transforming her body into her worst nightmare. He orders Rondel to take her to the "rehabilitation unit"...

Jondar's sentence is read out by the Chief Officer, who leaves the guard Maldak to observe the execution. Maldak is wearing an anti-hallucination helmet to counteract the illusions of the Punishment Dome, but when the TARDIS materializes behind him he assumes that his helmet is faulty. The Doctor and Peri emerge and are surprised when Maldak denies their reality and frantically radios in for assistance. The Doctor manages to catch him off guard and overpowers him, knocking him out.

Sil is furious when Jondar's execution is interrupted, and demands that the strangers be captured and killed as well. The Chief and Bax set off to deal with the new arrivals, and Sil threatens to cut off his company's ties to Varos should the political situation destabilise. The Governor, too weak to argue, passes out while still insisting upon a price of seven credits per unit for zeiton-7 ore. He has no idea of the true worth of the mineral, and Sil has no intention of telling him that the engineers of every known solar system are crying out for supplies. Sil decides to summon a colonisation force from his homeworld, intending to seize control of Varos and thus the means of power for the entire galaxy.

The Doctor uses the random laser emitter to burn through Jondar's chains, freeing him from the wall, but by the time he's finished a guard patrol has arrived, cutting them off from the TARDIS. The Doctor turns the laser emitter around to shield their escape, and one of the guards is vaporised before Prison Control can cut off power to the laser. The guards pursue the Doctor, Peri and Jondar into a dead-end corridor, but the Doctor manages to short-circuit a camera and knock out power for the entire section. While the guards are delayed a secret panel opens in the wall and the Doctor, Peri and Jondar are ushered to safety by Areta and Rondel, whom it turns out is on the rebels' side after all. They try to escape but run into another patrol, and Rondel is killed while the others flee deeper into the Punishment Dome. Arak and Etta watch at home, cheering the fugitives on. This group of prisoners is *good*.

While hiding from the patrols, Jondar and Areta explain the purpose of the Punishment Dome to the Doctor and Peri. The whole Dome is wired with cameras which broadcast their struggles to the desensitised population, and with traps which kill in various spectacular ways. The only way back to the execution yard and the TARDIS is through the dangerous Purple Zone, where the travellers are apparently menaced by a giant insect; the Doctor, however, realizes that it's an illusion, and leads the others through to safety on the other end. There, they are attacked by a beast with glowing green eyes -- but again it's just another trick, to draw the fugitives into a false sense of security so they may subsequently walk into a real trap, believing it's an illusion until it's too late.

The Doctor and his friends are getting very good audience appreciation figures, which, as far as the Chief Officer is concerned, means that the video of their eventual capture and execution will sell through the roof on every civilised world. Sil, however, is more disturbed by the new arrivals' dress and behaviour -- they obviously aren't from Varos, and Sil suspects they're rival agents from Amorb Prospecting. He orders the Chief to capture and interrogate them, and to remove the TARDIS from the execution yard for study. If the new arrivals do turn out to be from another mining corporation he threatens to sever his company's ties with Varos completely, leaving the people to starve.

By the time the Doctor and his companions get back to the execution yard, the TARDIS has been removed. While searching for it they encounter a patrol, and the Doctor is separated from the others, who are captured. Areta and Jondar are taken to the termination cells, while Peri is taken to Prison Control by Maldak, who's furious with her and the Doctor for making him seem a fool on public broadcast. The Doctor, meanwhile, is trapped in a long corridor full of blazing white light, and when the passageway is sealed off behind him he has no choice but to continue onwards -- into a no-options kill zone. The heat and light increase dramatically, and he begins to hallucinate that he's trapped in the trackless expanses of the desert. As a scorching wind blows sand in his face, he falls to his knees and sees a mirage of Peri holding out a glass of water; the image fades when he reaches out to her, and he falls to the ground, sweating profusely.

Peri watches in horror as the Doctor's body is taken to the Dome's morgue for disposal. She is then interrogated by the Governor and the Chief Officer, and by Sil, who is certain that she and the Doctor are agents of Amorb Prospecting, poaching his territory. The Governor is willing to listen to another company's offer -- or would be, if not for the fact that the people have already voted to accept Sil's offer even though it means working on starvation wages. Before ratifying the new contracts, however, the Governor wishes to question Peri further.

Arak decides to take a nap while the morgue attendants prepare to dissolve the Doctor's body in an acid bath. But the Doctor isn't dead after all, and his revival so startles one of the guards that he knocks his co-worker into the acid baths. The surviving guard attacks the Doctor, but as they fight the dying guard, trying to pull himself out of the acid, accidentally pulls his co-worker in with him. The Doctor departs back into the Dome, but while trying to disguise himself and escape he is recaptured by Quillam.

Peri is repulsed by the Varosians' casual attitude towards death; even the Governor, who seems almost sympathetic, is willing to bargain her life for information when he learns that the Doctor has survived. Peri tries to explain that she's a time traveller whose ship requires zeiton-7 ore to function, but the Governor doesn't believe her, and Sil and the Chief Officer demand that she be given to the rehabilitators, in the hope that Quillam's molecular transformation process will bring out the truth from her mind. Upon learning that the Doctor has been recaptured, the Governor decides to stage a primitive execution.

Arak takes a nap and awakens to see the screen showing two stranded cannibals fighting each other in the Dome. He's worried when he sees Etta writing out her viewers' report -- what is she saying about him in it? Is she mentioning his subversive comments and the fact that he was sleeping through a broadcast? He's too frightened to say anything...

The Doctor and Jondar are taken to be hanged while Peri and Areta are sent to face Quillam's transmuter. Sil arrives to watch the execution and the Doctor learns that he's a representative of Galatron Mining, here to negotiate the yearly price for zeiton-7 ore. The Doctor and Jondar are marched up a gallows and nooses are tied around their necks, but the Doctor insists that he's here to help Varos achieve its full potential and reveal the true worth of zeiton-7 ore. Sil, desperate to silence him, sends his bearers to kill him, but when they trigger the gallows trapdoors Sil learns what the Doctor had already suspected when he noticed the cameras weren't broadcasting; this "execution" was just a bluff to frighten the Doctor into confessing the truth. The Doctor refuses to say anything more until Peri and Areta are released unharmed. Sil, infuriated that the Governor is keeping the Doctor alive, announces that he will reject all further offers, and realizes too late that this frees the Governor from his people's decision to accept Sil's offer.

Sil and the Chief, worried that the Governor might listen to the Doctor and needing to buy time until the colonisation force arrives, decide to leave Peri and Areta under the transmuter. Areta is already beginning to transform into a reptile while Peri is becoming a bird. The Doctor is appalled to learn that the officers have no real idea how the process works; in fact, Quillam doesn't even know if it's possible to reverse. The Doctor, trying to catch Quillam off guard, reaches out and pulls off his mask to reveal a hideously scarred face, the result of Quillam's earlier failed experiments. Jondar takes advantage of the distraction to overpower his guard, Maldak, and take his gun. The Doctor opens fire on the panel which controls the traps in the Punishment Dome, thus not only shutting down the transmuter but most of the Dome itself. He and Jondar then head to the transmuter, taking Maldak as their hostage, but they release him once they've rescued Peri and Areta. Their only hope of escape now is the rumoured safe route at the other end of the Dome. Quillam now has no control over the traps in the Dome, but refuses to switch the power off; if he does this every prisoner in the Dome will escape, and he is determined to catch the Doctor and make him suffer...

The Doctor finds an abandoned patrol car in the Dome, but while he and Jondar are hot-wiring it, Peri, still disoriented by the transmutation process, wanders off and is recaptured. She is returned to Prison Control, where the Governor is refusing to sign contracts with Sil until he's heard the Doctor's story. But the Chief Officer cites a regulation which allows him to force a final vote when it appears that a doomed Governor is deliberately avoiding it. The Chief intends to broadcast his case to the people first; anything the Governor says in his defense will be seen as a desperate attempt to save his own life, while Peri's claims will be dismissed as the ravings of someone disoriented by the transmuter.

Maldak is left to guard the Governor and Peri while the Chief assembles the senior officers for the lottery; whoever loses will become the next Governor, but will soon realize that even a man in fear of his life will find no easy or popular solutions to the problems of Varos. The Governor tries to convince Maldak that the system is unfair; Maldak may find that he has been "elected" the next Governor, and even if he escapes that fate, the new Governor may decide to use him as a scapegoat, blaming him for the prisoners' escape in order to appease the people. But Maldak, although he's clearly moved by the Governor's arguments and recognizes the unfairness of the system, is unwilling to betray his position and allow the Governor and Peri to escape.

The Doctor's patrol car loses power, and he, Jondar and Areta are stranded in the endzone, where the traps will be all the more dangerous. They proceed on foot, and find themselves in a green corridor where they seem to see themselves at the end of the corridor, beckoning them on through the mist. The Doctor resists the illusion and banishes the phantoms, revealing that he and his friends were about to walk into a pit of acid.

The Chief broadcasts to the people of Varos, and the Governor is given the briefest of chances to explain himself. Arak isn't even listening; as soon as the vote is called he punches "no" on both his and Etta's voting boxes before Etta can do anything. The Governor is strapped in place as the cell disintegration beams pour forth, but Maldak is unable to stand by any longer and opens fire, destroying the cell disintegrator. He leads Peri and the recovering Governor into the ventilation system, where they can safely enter the Dome and rescue the Doctor. Sil, furious, orders the Chief and Quillam to take personal charge and prove that they are really in control of the situation.

The Doctor, Jondar and Areta find a body with a gruesome swollen scar on its neck, and are then attacked by cannibals, fellow prisoners driven mad by the Punishment Dome. They flee into a garden area full of hanging vines, and when one of the pursuing cannibals brushes up against a vine he is instantly killed, his exposed skin swelling. The other cannibal abandons the pursuit. Areta then hears a patrol car approaching, and, realizing that they are trapped, the Doctor pulls a length of string from his pocket and has Jondar tie back a clump of vines. The car arrives, bringing with it the Chief, Quillam and their guards. The Chief wants to kill the Doctor immediately, but Quillam points out that the cameras are still broadcasting; he wants the Doctor's protracted sufferings to be broadcast to every home in Varos. But as he approaches, the Doctor has Jondar release the string, and the vines to fall back into place, instantly killing the Chief, Quillam and the guards.

The Doctor, Areta and Jondar return to the Dome and are reunited with Peri, Maldak and the Governor. They return to Prison Control, where Sil gloatingly informs them that an occupation force from his homeworld will soon seize control. But a missive from Thoros Beta arrives, announcing that new deposits of zeiton-7 ore have been located on the asteroid Bio-Sculptor. The invasion has been called off and Sil is authorised to pay any price the Varosians set for their ore. The Governor prepares to open new negotiations at a price of 20 credits per unit as Sil convulses apoplectically. The Doctor requests just enough zeiton-7 to repair his TARDIS, which the Governor is only too happy to grant, and the Doctor and Peri head off, leaving Sil to the mercy of the Varosians.