An elderly couple named Ray and Martha Spruce (Kennedy and Lamour) in a small, fictional, southwestern town called Dead River, oversee a general goods store whose decor includes a cigar store Indian named "Old Chief Wood'nhead" (Dan Kamin) on the front porch. They are humbled to see their old, run-down town coming to a bitter end. The Spruces are then visited by a Native American elder named Benjamin Whitemoon from a local tribe who gives them turquoise jewellery, which are his tribe's sacred treasures, as collateral for the debt the tribe has incurred.
The elder bids them and Old Chief Wood'nhead (who nods to him, briefly startling him) farewell and returns to his tribe. Later that night, the Spruces are subject to a vicious robbery led by Benjamin's estranged ne'er do well nephew, Sam (Holt McCallany) armed with a shotgun, and his two friends, Andy and Fatstuff. After ransacking the store, Sam demands that Ray hand over the turquoise. The Spruces refuse, and are fatally shot by Sam. The three thugs then leave in their car and begin preparations to run away to Hollywood, California, where the vain Sam expects to become a movie star, in part due to his long, dark hair. Old Chief Wood'nhead then comes to life after they leave, and goes out on a vicious warpath to kill them and avenge the murdered Spruces
After brutally killing Fatstuff and Andy, Old Chief Wood'nhead corners Sam in his home, with Sam being unable to fight back as the shells from his shotgun have no effect on his wooden assailant. Sam attempts to lock himself in his bathroom and escape through a window, but Old Chief Wood'nhead breaks through the wall, grabs Sam by his long hair, pulls him through the wall, and scalps him.
When Benjamin Whitemoon wakes up in the morning, he finds the bag containing the turquoise jewellery by his side. He visits the Spruce's general store to find Old Chief Wood'nhead on his pedestal, holding his nephew's bloody scalp, a blood-stained knife, and fresh warpaint adorning the chief's face. Now aware of what has happened to the Spruces and what Chief Wood'nhead has done to the killers, Benjamin wishes the old warrior a peaceful afterlife and drives away.