The villagers of Frankenstein meet in their town hall and proclaim that the hamlet is cursed by the deceased Baron Heinrich Frankenstein, creator of the famed monster.  The mayor reminds them that the monster has been killed and that Ygor, the mad doctor's assistant, was "riddled with bullets" by the baron's oldest son Wolf.  The townspeople nevertheless decide to destroy Frankenstein's castle, hoping to break the curse, but they inadvertently release the monster from its "grave" in the sulphur pits.  The crippled Ygor then decides to take the monster to Dr. Ludwig Frankenstein, the second son of the baron.

Ygor and the monster arrive in Ludwig's village of Vasaria, where the monster befriends a young girl named Cloestine Hussman and is then captured by the villagers.  When the village prosecutor, Erik Ernst, asks Ludwig to examine a "madman" who has been chained in the police station, the doctor discovers that it is his father's creation.  Ygor tells Ludwig that only he can fix the monster's "sick" brain, but Ludwig insists that he wants nothing to do with his family's legacy.  The monster is later put on trial, and when Ludwig claims no knowledge of him, the irate creature breaks his chains and, with the help of Ygor, escapes.

That night, Elsa Frankenstein sneaks into her father's library and learns of the family secret from her grandfather's diary.  Ygor and the monster later go to the Frankenstein villa, where the monster kills Ludwig's assistant, Dr. Kettering.  Ludwig captures the monster with the use of sulfuric gas, then promises his daughter that he will find a way to destroy it.  Ludwig asks Dr. Theodor Bohmer to help him dissect the monster, a reversal of his father's method of creation, but the insanely jealous surgeon refuses.

As he prepares for the dissection, Ludwig is visited by his father's ghost, who asks him to save his life's work by replacing the diseased brain with a new one.  Ludwig then decides to replace the monster's brain with that of the recently deceased Kettering.  Ygor protests that the operation will cost him "his friend," and offers his own brain instead.  When Ludwig refuses, Ygor convinces Bohmer to perform the operation with his brain, offering the physician unlimited power in return.

Meanwhile, Erik and the chief constable arrive at the Frankenstein home and insist on searching the estate for the missing Kettering.  While they discover numerous secret passageways, they do not find the monster, who is now loose and roaming the village.  The monster abducts Cloestine and "tells" Ludwig that he want Cloestine's brain, but with the help of Elsa, the little girl is spirited away.  The operation begins, with Bohmer, unknown to Ludwig, using Ygor's brain.  Two weeks later, Cloestine's father rallies the townspeople against Frankenstein, but Erik convinces them to let him question the doctor before they act.  Ludwig confesses all to the prosecutor, then learns that he has been tricked by Ygor and Bohmer.

When the townspeople attack the castle, Ygor, now living inside the monster's body, orders Bohmer to turn on a deadly dose of the sulfuric gas.  As Erik rushes off to warn the invaders, Ygor suddenly begins to lose his eyesight.  Ludwig informs him that because he and the monster have different blood types, their sensory nerves will not work.  The angry Ygor then kills Bohmer, and, in his blind madness, sets the castle on fire, killing himself and Ludwig.  Erik and Elsa escape, however, and walk away from the burning castle to face a new life together.