In 1983, in North Dakota, Daniel O'Grady returns home from a trip to Ireland to tell his wife that he had captured a Leprechaun and that by doing so, acquired his pot of gold. Unbeknownst to him, the evil Leprechaun had stowed away in one of his suitcases, killing his wife by pushing her down the basement stairs. After burying the gold, Daniel discovers the leprechaun and tries to kill it by showing a four-leaf clover, the Leprechaun's weakness. He manages to trap him inside a crate and attempts to burn it and the house to the ground, but suffers a stroke, leaving the leprechaun inside, guarded by the magic of the four leaf clover.
10 years later in 1993, J.D. Redding and his teenage daughter Tory rent the O'Grady farmhouse for the summer when they meet Nathan Murphy, his little brother Alex, and their mentally challenged friend Ozzie Jones, who are re-painting the farmhouse. Ozzie is looking around the basement when he hears the Leprechaun's cry for help, mistaking him for a little child. He brushes the old four-leaf clover off the crate, letting the Leprechaun break free.
After trying to convince the others that he met a Leprechaun (which fails horribly due to his former ludicrous stories), Ozzie spots a rainbow and chases it, believing that there will be a pot of gold at the end. Alex accompanies him for fear Ozzie might hurt himself when they come across an old truck, with the bag of one hundred gold pieces magically appearing. After testing to see if it's real gold (where Ozzie bit the gold piece and accidentally swallowed it), they plot to keep it for themselves, hoping to fix Ozzie's brain.
The Leprechaun lures J.D. into a trap by imitating a cat, biting and injuring his hand. Tory and the others rush him to the hospital, followed by the Leprechaun, who traveled there on a tricycle. Alex and Ozzie go to a pawn shop to see if the gold is pure while Nathan and Tory are out, waiting on J.D.'s results. The Leprechaun attacks the pawn shop owner, killing him by crushing his chest with a pogo stick. After terrorizing and killing a policeman, the Leprechaun returns to the farmhouse, searching for his gold, while shining every shoe in the house. Everyone (minus J.D.) returns home, finding the house ransacked. Nathan goes out to see what is outside when he is injured by a bear trap set up by the Leprechaun.
After shooting the Leprechaun several times, they try to leave the farmhouse when the truck breaks down, due to the Leprechaun biting all the cords. After ramming the truck with his specially-made car, the Leprechaun terrorizes the gang until Ozzie reveals that he and Alex found the pot of gold. Tory recovers the bag from the old well, and gives it to the Leprechaun. Believing the worst to be over, they try to head out to the hospital. The Leprechaun is counting his gold when he discovers that he is missing one gold piece (which happened to be the very one Ozzie swallowed). Thinking that they have tricked him, the Leprechaun begins to terrorize them until Ozzie tells them about O'Grady, who was taken to a nursing home after his stroke. Tory decides to head out to the nursing home in order to find out how to kill the Leprechaun.
Tory arrives at the nursing home, searching until she finds O'Grady, who is actually the Leprechaun, who chases Tory to the elevator. Tory escapes, while the bloodied body of O'Grady crashes through the roof of the elevator, managing to tell her that the only way to kill him is by a four-leaf clover before dying. Tory returns home, and automatically starts searching for a clover until she is chased by the Leprechaun, who almost kills her until she is saved by Nathan and Ozzie. Alex tries to set a trap in the barn, but is attacked by the Leprechaun, almost killing him but Ozzie tells him that he swallowed the last gold coin, and is critically wounded by the Leprechaun. Before the Leprechaun can kill Ozzie, Alex takes the four-leaf clover from Tory, sticks it to a wad of gum and shoots it into the Leprechaun's mouth with his slingshot, taking away his power. The skeleton of the Leprechaun appears out of the well until Nathan hits him down and pours gas inside the well, blowing up the well and killing the Leprechaun.
The police arrive and Tory is reunited with her father, while the police investigate the remains of the well, where the Leprechaun vows he will not rest until he recovers every last piece of his gold.
Warwick Davis as The Leprechaun
Jennifer Aniston as Tory Redding
Ken Olandt as Nathan Murphy
Mark Holton as Ozzie Jones
Robert Gorman as Alex Murphy
John Sanderford as J.D. Redding
William Newman as Sheriff Roy Cronin