The TARDIS materialises on a fog-shrouded moor, and the Doctor sets off to find out where and when he is in order to recalibrate his newly-repaired ship's navigational systems. Peri nearly walks over a cliff in the fog, but is saved by a wild man with torn clothing and missing fingers. In a moment of lucidity he directs them towards the nearby village, and then flees so as not to be captured by the men he claims are hunting him. The Doctor and Peri make their way to what appears to be a coastal fishing town just in time to witness a funeral procession; when they enter the pub they learn that a boat recently went down in a squall, and that of the three men aboard, only Bill Neville's body washed ashore. Neville's brother Mike is angry about his death and is spoiling for a fight, but when he takes offense at one of the Doctor's offhand remarks and tries to beat some respect into him, landlord Robert Trefoil throws Neville out of the bar.

The hand-crafted clothing and furnishings seem to place them in the Victorian era, but there are a number of puzzling discrepancies; the silvering on the mirrors seems too smooth and the village doctor, Dave Madsen, speaks in a modern vernacular. Peri overhears a man telling his friends about a chicken at Hilly Painswick's farm, which kept moving for several minutes after it had been beheaded -- and even kept twitching after the frightened man had chopped it to pieces. The retired civil servant Sir Edward Baddesley, a new arrival to Dorsill, storms into the pub to have a word with Madsen about Bill Neville's death; why did Madsen let the man go out in a storm with a broken arm, and why was he buried without a post-mortem? Madsen insists that the man's arm was only bruised, and Baddesley storms out, unsatisfied -- but as Peri watches him go she sees him pull a cell phone out of his jacket. The Doctor has her snoop around the pub on the pretense of looking for the restrooms, and she finds a satellite phone link in Trefoil's office. A helicopter then passes by outside, finally proving that they are not in the Victorian era at all; in fact, Dorsill is cut off from the mainland by the currents, rocks and fog, and since the cost of shipping goods and supplying electricity to the islands is prohibitive, the islanders have chosen to make a virtue of living simply and supporting themselves.

The Doctor and Peri learn more about Dorsill from Trefoil and Madsen, who is in love with Trefoil's daughter Liz. The island used to be owned by a village trust, but they recently had to declare bankruptcy and sell out to developers; fortunately, government scientist and former Dorsill native Christopher Sheldon stepped in and bought the islands himself, ensuring that they would remain independent. The villagers owe him a debt of thanks -- but nobody knows where he got the money from, as it was believed that his family fortune was squandered by an ancestor who tried to build an architectural folly on a nearby island. The Doctor, suspecting that Madsen is hiding something else, decides to remain on the island for a while, telling Trefoil that he will wait until the fog clears and their "ship" can depart.

The next morning dawns bright and sunny, and the Doctor and Peri explore the island. The Doctor meets local gossip Mrs Tattleshall, who in the course of her conversation reveals that she saw Bill Neville before the fatal storm -- and that his arm had indeed been broken. The Doctor continues on to the local schoolyard, where he befriends the teacher Miss Devlin and shows the excited children a card trick in order to calm them down. To his surprise, once he shows one girl how to perform the trick, all of the other children promptly prove capable of doing it as well -- as does Miss Devlin. Meanwhile, Peri and the farmer Hilly Painswick watch in bemusement as a herd of sheep acts in unison to drive off a bewildered dog. Peri heads out to the moors to make sure she knows how to get back to the TARDIS, but is assaulted by Mike Neville -- who is then driven off by the arrival of the wild man, whom he seems to recognise and look up to. Peri returns to the village, and the wild man returns to his hiding place -- only to be recaptured by a man named Rogers armed with a tranquiliser gun.

The Doctor breaks into Sir Edward's home to investigate further, and finds a passport bearing Sir Edward's photograph but made out in the name of Sir Anthony Kelso. He tells Peri to wait in the nearby churchyard for Sir Edward (or Anthony) to return, while he goes to Sheldon's Folly to speak with the reclusive Christopher Sheldon. While there, he overhears Dave Madsen speaking with a man named Logan Packwood, who tells Madsen he needs more material -- which means removing the subject's left arm. The Doctor introduces himself to Packwood and his associates Rogers and Janet Spillsbury, but they claim that Sheldon left for the mainland just that morning. The Doctor has no choice but to depart, but he has spotted the helicopter in the nearby coach house and is aware that nobody heard it depart or arrive...

Peri falls asleep waiting for Sir Edward to return, but is woken near midnight when Sir Edward enters the churchyard with a wheelbarrow and spade. As she watches from hiding, Sir Edward digs up Bill Neville's corpse and takes it back to his cottage. He catches her spying on him, but the Doctor then arrives and confronts him, and he explains that he's just trying to find out what's going on. He retired to the islands for some peace and quiet but suspects that something strange is happening, and hopes to determine whether Madsen really did lie about Neville's arm. The Doctor, choosing not to challenge Sir Edward on the matter of his name just yet, examines the body and finds no evidence of any injury to the arm -- but there are two puncture wounds in its neck, as if from an injection. The Doctor, Peri and Sir Edward take the body back to the grave -- but it returns to life before they can bury it, climbs back out of the grave and lurches out of the cemetery. The Doctor reburies the coffin to avoid attracting the villagers' attention, but he and his friends now have proof that something strange is indeed happening...

Neville's body crosses to Sheldon's Folly, horrifying Janet but fascinating Packwood. Realising that Janet is badly shaken by this unexpected side effect, Packwood sends her to the main island to continue her research, to get out of the house for a while and find out if any of the villagers noticed the dead man walking. Shortly afterwards, Madsen arrives and announces that he's had enough; Liz has confronted him about his lies, and he can no longer continue the experiment with a clean conscience. But Packwood reveals that they have already developed a strain which can be administered orally, and that he infected Madsen with the ice in his whisky the last time Madsen visited the Folly. And Madsen has since passed the infection on to Liz with his kiss. Devastated, Madsen returns to Dorsill and tries to commit suicide with sleeping pills -- but the overdose has no effect on him. He slashes his wrist, only to see the injury heal within seconds, and finally resorts to blowing his brains out with a shotgun. This kills him -- but not his body...

Peri is coming down with a cold after having fallen asleep in the cemetery, and she therefore remains at the pub while the Doctor and Sir Edward try to follow the dead man's trail. While there, she meets Janet, who speaks warmly of Christopher Sheldon and reveals that she worked with him on a number of experimental projects. Peri goes out for a walk and once again meets Hilly Painswick, who offers her a glass of fresh, cold milk. The milk and the walk seem to clear Peri's head, and she rejoins the Doctor and Sir Edward just as the Doctor tricks Sir Edward into acknowledging his real name, Sir Anthony. Sir Anthony thus admits that he used to be Christopher Sheldon's superior at the Minsitry of Science, but was "offered" early retirement after objecting to potentially unethical experiments. Before he left, he learned that the government had sponsored Sheldon's purchase of Dorsill, and came here under an alias so that Sheldon wouldn't realise he was here. All he knows about the project is what his former PA, Madge Simpson, overheard -- which was that it has something to do with "Gatherer Three". The Doctor recognises the name of a recent deep-space probe, and when Sir Anthony identifies Packwood as a geneticist and Peri reveals that Janet and Sheldon had been working together on a DNA computer, the Doctor concludes that the probe brought back alien genetic material with it. Perhaps a parasite which promotes quick healing in its host's body -- something that doesn't know to stop healing the body after the host's brain has died...

Janet notices that the villagers are beginning to suffer from headaches and muscular spasms, and heads for the pier, realising that the experiment is out of control. Meanwhile, the Doctor, Peri and Sir Anthony are attacked once again by Mike Neville, but as they try to fight him off, the dead bodies of Bill Neville's fellow fishermen rise from the sea, having finally walked to land. The dead fishermen kill Mike, and Madsen's body arrives and joins the chase as the dead men pursue the Doctor and his friends to the pier. Janet arrives and helps them to escape, but she twists her ankle in her flight -- and although they manage to board a motorboat and flee, Janet finds that her ankle has already healed. She admits that Dorsill was chosen for its isolation as a test site for the genetic material, which Sheldon had named "Denarian" as a joke, deriving the name from "DNA". But the experiment is out of control, and the entire population of Dorsill has become infected. Janet thought the material was a universal cure-all, but it is now clear that the Denarian preserves its host only to ensure its own survival -- and that it is now taking the next step, ensuring its survival by taking conscious control of the host's mind.

The Doctor and his friends try to warn Packwood of the danger, but he too is infected and under the thrall of the Denarians. Janet pretends to succumb and helps Packwood to lock the Doctor, Peri and Sir Anthony in the cellar, planning to rescue them later. There, they are reunited with the wild man -- Christopher Sheldon, who was the first to be infected by the Denarians. He is thus being used as an incubator for the raw genetic material, which the infected humans acquire by amputating his limbs. Since his limbs soon grow back, there has been no physical damage, but the trauma has unhinged him, and he babbles to Sir Anthony about needing a wheelchair. Packwood catches Janet trying to free the others and takes them all to the living room, where the dead Bill Neville serves tea as Packwood explains that the Denarians are offering a symbiotic relationship which benefits the host as much as the Denarian itself. Sir Anthony and Peri see his point of view; Peri's aunt died of a long protracted illness, and Sir Anthony knows a boy who was paralysed for life by an avoidable childhood accident. But the Doctor reminds them of Mike Neville's murder; the Denarians care for nothing but their own survival, and will kill anybody who stands in their way. If Packwood can't see that, he's completely under their thrall.

Packwood prepares to kill the Doctor, but the Doctor knocks over an oil lamp as a distraction, setting Bill Neville's body ablaze. The Doctor, Peri, Janet and Sir Anthony attempt to escape, only to find the Folly surrounded by villagers, summoned "home" by the Denarians within them. The Doctor locks them out and flees to the cellar; there, knowing that Gatherer Three passed through a region of space nearly devoid of X-ray emissions, he lures Packwood into the X-ray room and turns the machine to full strength, temporarily stunning the Denarians and restoring Packwood to full consciousness. Packwood reveals that they only intended to test the Denarians on the sheep and cows of this isolated community at first, but moved on to human "testing" as the Denarian influence gained hold over them -- and that the Denarians have now infected the island's entire food chain. Realising that the Denarians within him are recovering, Packwood locks himself in the X-ray room and exposes himself to a sustained burst, killing himself and the infection within him.

The villagers storm the house, but Janet manages to resist the infection long enough to tell the Doctor of a coal chute he can use to escape. The Doctor chooses to remain and find a cure, and tells Peri to get to Dorsill, find Sir Anthony's cell phone and contact the mainland. Sir Anthony gives her Madge's home phone number in case she can't get through to the Ministry. Trying not to think about the fact that a glass of milk from Hilly Painswick's cows seems to have cured her cold, Peri flees the Folly, pursued by Liz Trefoil and the late Dave Madsen, and attacked by the island's owls and foxes. She manages to get to Dorsill safely but is unable to find Sir Anthony's cell phone; however, she recalls finding a satellite phone link in the pub, and tries using it to call Madge Simpson. Madge is concerned to hear that Sir Anthony is in trouble, and asks Peri if he's having any trouble getting about on the island in his wheelchair. Before Peri can respond Liz and Madsen arrive and rip the phone out of her hands, but Peri shoots Madsen with a flare pistol, incinerating him, and flees to the attic -- where she is attacked by a flock of seagulls which have come through a hole in the roof. She falls out of a window to the street below, and although her injuries soon heal, by the time they have done so the Denarians have taken control of her mind...

The Doctor locks himself and his allies in the laboratory, takes a blood sample from Sheldon and tries to synthesise a pure form of the Denarian infection for analysis, but as he does so, Madge, worried by the odd phone call she received, tries to call Sir Anthony to see if he's all right. Sir Anthony's cell phone goes off in his pocket, and the Doctor realises that he had it all along and yet didn't tell Peri. He has been infected all along, and his explanations for his behaviour have simply been rationalisations of the acts he was driven to by the Denarians. Sir Anthony and Janet inject both Sheldon and the Doctor with the pure Denarian solution, and while Sheldon regains his sanity almost instantly, the Doctor willingly walks out of the laboratory with Janet and Sir Anthony. As soon as they're outside, however, he nips back in and locks them out, as the Denarian infection was no match for his Gallifreyan metabolism. Sheldon realises that his fingers had stopped growing back for a moment, but are now doing so again, and the Doctor theorises that the pure Denarian solution -- a second generation -- regarded his primary infection as a disease and thus destroyed it. What they need is a hybrid generation, which will destroy the infection in the villagers, and then burn itself out.

The villagers break into the laboratory just as the Doctor finishes his work, but he and Sheldon manage to inject Janet and Sir Anthony with the cure, breaking the Denarians' hold over them almost instantly. As Janet, Sir Anthony and Sheldon hold off the raging villagers, the Doctor mixes up more of his solution and loads it into the tranquiliser gun which Rogers had used earlier while hunting Sheldon. He thus frees the villagers from Denarian control, and then mixes up a new batch of his solution which can be absorbed through the skin. The others guard him while he takes it to the helicopter, pursued by villagers driven to protect the Denarian life form at all costs. The Doctor, however, dips his coat into the solution before they attack, and anybody who touches him is thus instantly cured. Peri attacks them, but the Doctor overpowers her, dumps her into the tub with the solution and sends her to guard the door while he and the others roll the helicopter out of the coach house. The villagers are unable to get to him in time, and he pilots the helicopter over the crowd, spraying them all with the antidote, and thus curing them.

The Doctor, Sheldon, Janet and Rogers then mix up more of the solution and use the helicopter to bombard the rest of the island chain, putting paid to the Denarian influence for good. Satisfied that the menace is over, the Doctor and Peri return to the TARDIS and depart, unaware that two pale-eyed seagulls are even now flying towards the mainland...