It tells the story of a successful pianist investigating the disappearance of his sister in an urban decadence as a serial killer targets prostitutes and sex workers.

The film initially received a small theatrical release in March 1983 in Canada before appearing on television in the United States the same year.

In the dead of winter in a large unnamed American city, Isabelle smokes a joint on a cheap hotel bed while one of her johns finishes showering in the bathroom.

The man exits the bathroom wearing only a towel and the gloves, and violently kills her, slashing her throat multiple times with a straight razor.

Eric locates the strip club where Isabelle worked and speaks to her coworkers, including dancers Louise and Andrea, who live in the same apartment building.

Late one night, Louise is accosted by a strange man in an upstairs hallway of the apartment building and flees, only to be met by Eric outside.

As she prepares to leave the club from her upstairs dressing room, she hears strange noises downstairs, and initially attributes them to Wally, a bouncer.

"[9] Film critic and writer Scott Aaron Stine deemed American Nightmare a "seedy murder mystery" that will "undoubtedly interest fans of '70s sleaze more than '80s horror or splatter.

gave the film a favorable review, writing: "American Nightmare will impress some and turn off others, but its decaying and seedy aspects are undeniable".

[11] Jacob Helgren, writing for the Hysteria Lives!, also gave the film a positive review, stating, "[American Nightmare] is one I definitely recommend.

"[12] Rhett Miller of Canuxploitation!, wrote, "American Nightmare is a uniquely Canadian perspective on the depravity of [the United States].

While the message may be a tad too pessimistic, and the overall feeling of the film may be gritty, dark and depressing, it is nevertheless a quality motion picture.

The giallo film in Europe was a way for filmmakers to comment on the physical and moral decay of its city streets, and [director Don McBrearty] has done something brave in reviving the fundamentals of the genre to offer a similar critique on America."