The film follows Warwick Davis as the evil leprechaun Lubdan, who searches for his magic flute that three hoodlums stole and kills anyone who gets in his way.

In Los Angeles, California, Mack Daddy O'Nasses and Slug discover a hidden room full of gold, along with a leprechaun that has been kept as a statue by a medallion on its neck.

After failing to sell a guitar they falsely claim belonged to Jimi Hendrix to pawn shop owners Jackie Dee Redding and Chow for money to buy a new speaker, Stray Bullet manages to convince Mack Daddy, now a successful record producer, to pick them up.

The Leprechaun hunts the friends with the help of his "Zombie Fly Girls" (a trio of women enslaved by his magic) in order to recover his stolen flute, which places listeners of its tune in a euphoric trance.

Mack Daddy, who survived due to the bullet being caught by his necklace, also hunts the friends to reclaim the flute, which is the key to his success.

The Leprechaun magically forces Stray Bullet to point his gun at Butch's head, threatening to kill him if the flute isn't returned to him.

Later, Butch visits Postmaster P. at his grandma's house and convinces him to use a joint laced with four-leaf clovers to strip the Leprechaun of his powers in order to steal back the flute and use it to find success in Las Vegas.

After avenging the death of Stray Bullet, the boys take the flute and head downstairs to escape, only to be intercepted by Mack Daddy, who shoots Butch, killing him.